Shopify Inc., the Canadian company known for its e-commerce platform catering to small businesses, has announced a second round of layoffs affecting 20% of its workforce. In addition to this, it has sold off its logistics branch to Flexport, a freight forwarding company. As a result of this announcement, the company’s U.S.-listed shares have jumped up 16% in premarket trading.
The first quarter of the year saw better-than-anticipated results from the company as inflation prompted more merchants to use Shopify’s online tools and targeting services to attract customers. This led to a surge in the number of businesses joining the platform, including well-known brands like Mattel and Coty, which allowed Shopify to increase its subscription fees.
In anticipation of the pandemic-induced e-commerce boom, Shopify had bolstered its order fulfillment network. However, by mid-2022, the company realized that it had overestimated growth levels, leading to a layoff of 10% of its workforce in July. As the pandemic’s effects on e-commerce wane, investors have been scrutinizing Shopify’s spending on its fulfillment network, concerned that the capital-intensive project could negatively impact earnings.
Shopify’s logistics unit, Deliverr Inc, was acquired for $2.1 billion less than a year ago, but has now been sold to Flexport in an all-stock deal, giving Shopify a 13% stake in the startup in which it had previously invested.
According to Refinitiv data, revenue for the first quarter that ended on March 31 was $1.51 billion, exceeding analysts’ estimates of $1.43 billion. Additionally, the company reported an unexpected adjusted profit of 1 cent per share, compared to the expected 4 cent loss.
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