Shopify Stock Falls Despite Big Q4 Gains

Shopify — which seeks to be the e-commerce back end for brands of all sizes — managed to keep up its brisk growth in the fourth quarter and turn a profit for the year.

But Wall Street has questions about just how much it’s going to cost to keep the growth up, pressuring the company’s stock and leading to a 13.4 percent decline to $77.18 on Tuesday.

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While e-commerce is still a game that Amazon dominates, Shopify has been steadily bringing more merchants on board and selling services to brands to help them grow their businesses.

Well-known players that joined the platform last year included Nike Strength, Dollar Shave Club, Banana Republic Home, Authentic Brands Group, Oscar de la Renta, Everlane and On Running.

The company’s comprehensive earnings tallied $667 million for the fourth quarter, marking a big swing from losses of $601 million a year earlier.

Revenues for the quarter ended Dec. 31 rose 24 percent to $2.1 billion as gross merchandise volume — the value of the goods sold through Shopify’s e-commerce platform — increased 23 percent to $75.1 billion.

The quarter helped push Shopify in the black for the full year, with earnings for 2023 totaling $152 million, compared with losses of $3.5 billion in 2022.

Revenues for the year increased 26 percent to $7.1 billion while GMV gained 20 percent to $235.9 billion, an increase of $38.7 billion over the prior year.

Like other tech companies, Shopify saw a big boost during the pandemic, but later had to reverse course as growth cooled off. The firm cut jobs in 2022 as it refocused operations.

Harley Finkelstein, president of Shopify, told analysts on a conference call that it was a “phenomenal year.”

“Commerce moves fast, and we moved faster,” Finkelstein said. “We reshaped the company to be flatter, more agile and built to address every corner of commerce, never losing sight of our mission to make commerce better for everyone.

“And as a result, we continue to break down barriers, accelerate the power of entrepreneurship and fuel our merchant success,” he said. “No matter which way you look at our business, be it merchants, products or channels, we delivered an incredible fourth quarter to finish off an amazing year of growth.”

Operating expenses during the fourth quarter fell 22 percent from a year earlier due to the sale of the company’s logistics business, lower headcount and the lack of a real estate impairment charge. Compared with the third quarter, expenses were down 1 percent.

But Shopify said its first-quarter operating expenses would rise by a percentage in the low teens in the first quarter, compared with the fourth quarter, driven by marketing and employee-related expenses.

Analysts peppered Finkelstein with questions on the expense increase, but he said the company was going to remain disciplined.

“In the last 18 months or so, we’ve made incredible improvements across go-to-market and growth engines, which optimizes a couple of things,” he said. “It optimizes our ways of working. It drives greater automation and efficiency, but it also diversifies our marketing effort to support our growth. Now what that means is we can actually have incredible rigor and discipline when we see opportunities that enable our success. That doesn’t mean we’re going to just spend when we don’t see those things.”

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