Shopify revenues nearly double in Q2 amid COVID-19 shift to e-commerce

By Canadian Press

COVID-19 is proving to be no match for Shopify Inc., which nearly doubled revenues and reported US$36 million in profits as the pandemic raged across Canada.

While many Canadian businesses filed for bankruptcy or watched sales disappear in record time amid the health crisis, the Ottawa-based tech company said Wednesday that its revenues surged by 97 per cent in its second quarter.

Shopify’s stock price was up by almost 10 per cent or $127.60 to reach $1,436.55 in morning trading.

Chief operating officer Harley Finkelstein attributed the growth to companies — including Schwinn, Farm Boy, Snickers and Molson Coors — switching to using Shopify’s products or starting e-commerce stores for the first time.

The company is seeing an acceleration of companies making the switch from their legacy platforms, he said.

“We’re also seeing digital transformation generally is pushing larger retailers to look at partners who are nimble, who are flexible, who are certainly cost-effective and that’s Shopify Plus for the larger brands.”

The flurry of activity Finkelstein discussed propelled Shopify revenues in the three months ended June to US$714.3 million from US$362 million a year earlier.

Shopify also earned 29 cents per diluted share in the quarter, compared with a loss of 26 cents per share or US$28.7 million in the prior year, and adjusted earnings hit US$129.4 million or $1.05 per share, up from US$10.7 million or 10 cents per share in the second quarter of 2019.

Shopify was expected to report a net loss of 59 cents per share or adjusted profit of one cent per share on $513.8 million in revenues, according to financial markets data firm Refinitiv.

Shopify chief executive Tobi Lutke said the trends he saw at Shopify and elsewhere over the last few months tell him that “2030 has gotten pulled forward into 2020.”

“I think in retail they are all finding … software that feels like a decade-old because all the assumptions have been tossed into the air and reassembled based on COVID,” he said.

“COVID has accelerated this thing that was already going on.”

The pandemic highlighted how lucky Shopify was to be a company that was born and bred on the internet and already at work on a fulfillment centre network intent on lowering shipping costs and ensuring timely deliveries for U.S. merchants.

Shopify had to look at how to speed up some of its plans and rejig others that had been formed before the pandemic, but the challenges they faced were nothing compared to businesses who had to close their doors and convert to online sales with no notice.

Shopify was ready for the moment and moved new companies to its software as quickly as it could, eventually experiencing a 71 per cent surge in new store growth.

At the same time, Lutke pronounced the company “digital-by-default” and told his staff that Shopify is moving to a permanent remote-work model for most employees.

Chief financial officer Amy Shapero said Wednesday that Shopify will be keeping its offices closed for the remainder of 2020, redesigning its spaces for its new future and reducing its office footprint.

Employees she said will work from home most of the time, but be able to use office spaces when it makes sense.

“This also represents an opportunity for Shopify to open up and further diversify our talent pool, unconstrained by physical location,” she said. 

“While our offices were a special part of the Shopify experience, our culture is not defined by it.”

This report by The Canadian Press was first published July 29, 2020.

Companies in this story: (TSX:SHOP)

Tara Deschamps, The Canadian Press

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