Shopify stock tumbles after gains for worst day on record

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Shopify Inc. shares plunged for their worst day since records began on Wednesday after the e-commerce company beat expectations with its latest results but signaled its growth could be slowing as some benefit from the Pandemic era subside.

While Amy Shapero, Shopify’s chief financial officer, believes the pandemic has helped drive important behavioral changes in e-commerce, she also expects “a more measured macro environment compared to 2021.” Shapero predicts that Shopify SHOP,
-17.61%
will still see “rapid” growth in 2022, but at slower rates than 2021.

“Although we believe the COVID-triggered acceleration in e-commerce that spilled over into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022 and warranted near-term full-year caution on inflation and consumer spending We’re seeing economic growth that supports the continued penetration of retail by e-commerce,” she said on the company’s earnings call Wednesday morning.

Shares were down 18.1% in midday trade, according to Dow Jones Market Data, and were on track to post their biggest one-day percentage drop on record. Shopify’s stock has fallen 56.5% over the past three months as the S&P 500 SPX,
-0.53%
has lost 5.6%.

Shopify also said it plans to invest more heavily in fulfillment as efforts there move from a “prototype” phase to a “build” phase, according to Shapero. The company aims to simplify the fulfillment experience for merchants and has piloted a self-operated warehouse in Atlanta.

An expanded fulfillment network promises more opportunities for perks like one-day and two-day shipping, but it also requires investment in dollars. Shopify expects fulfillment spending “to increase in 2022,” and also now expects it to make about $1 billion in warehouse-related investments in 2023 and 2024.

The company faced several questions on the conference call about its fulfillment plans, including the company’s decision to self-operate more of its fulfillment centers.

“It’s not like this will be fully owned by Shopify, but we want to bring Shopify warehouses together with partner warehouses, and we expect quality and capacity to increase as a result of this change,” said President Harley Finkelstein the conference call.

In the most recent quarter, Shopify grew revenue to $1.38 billion from $978 million a year earlier, compared to a forecast of $1.34 billion by analysts polled by FactSet.

The company posted a net loss of $371.3 million, or $2.95 per share, for the fourth quarter, compared to net income of $123.9 million, or 99 cents a share, in the year-ago quarter. Shopify’s net loss for the most recent quarter reflects a $509.7 million net unrealized loss from investments.

Shopify beat consensus expectations for adjusted earnings per share for the fourth quarter at $1.36, while analysts had expected $1.30. The company generated adjusted earnings per share of $1.58 a year ago.

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