The surge in online shopping during the COVID-19 pandemic propelled Shopify to new heights in the second quarter as the e-commerce giant’s revenues jumped 97 per cent year over year and the company recorded a profit of US$36 million.
Fuelled by a sharp rise in subscriptions to its platform that helps merchants set up online stores and offers other services such as point-of-sale payment systems, the Ottawa-based firm reported revenues of $714.3 million in the three-month period ending June 30, up from $362 million a year earlier.
Chief operating officer Harley Finkelstein told analysts some of retail’s biggest names – including bicycle manufacturer Schwinn, Snickers and Molson Coors as well as Ottawa-based grocery chain Farm Boy – signed on to the firm’s flagship Shopify Plus platform in the second quarter as established retailers rushed to meet the explosion of demand for e-commerce during the pandemic.
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As a result, Shopify’s gross merchandise volume – the total value of goods sold on its platforms – more than doubled to $30.1 billion compared with the second quarter of 2019, the metric’s biggest percentage gain since before Shopify’s IPO five years ago.
“That tells us that we’re on the right track,” Finkelstein said.
New features
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.
The market seemed to react positively to Wednesday’s earnings report. Shopify’s shares were up more than seven per cent to $1,406.07 in mid-afternoon trading on the Toronto Stock Exchange.
Finkelstein touted a bevy of new features the company has introduced over the past several months as it responds to constantly evolving merchant demands, including its new Shopify Balance feature that gives merchants access to a suite of financial products, the Shopify tap and chip card reader that was recently rolled out in Canada and a partnership with Walmart that will allow merchants south of the border to sell their products on the U.S. department store giant’s website.
CEO Tobi Lütke said Shopify is responding to the needs of brick-and-mortar merchants who might have avoided setting up online stores in the past due to the perceived complexity of running an e-commerce operation but realized they had to adapt to new market realities.
“COVID has accelerated this thing that was already going on,” he said, referring to the e-commerce trend that has been gaining momentum over the past decade.
Shopify’s co-founder said “2030 has gotten pulled forward to 2020” as retailers that had yet to embrace e-commerce before the pandemic began scrambling to establish an online presence.
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 fulfilment 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 it 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, Lütke 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.
She said most employees will work from home most of the time, but will 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 added.
“While our offices were a special part of the Shopify experience, our culture is not defined by it.”
– With files from the Canadian Press
