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Shopify Falls on Weak Outlook After Very Strong Start to 2024
Shopify tumbled on Wednesday after the Canadian company that helps retailers with online sales warned of slowing revenue growth and thinner margins in the current quarter.
This caught many investors off guard after the company rebounded strongly from the pandemic and started 2024 with a bang.
Shopify Inc. is forecasting revenue will rise at a high-teens percentage rate in the second quarter, well below the 23% jump in the first quarter.
The e-commerce company predicts that quarterly gross margin will decrease by about 50 basis points compared to the first quarter, in which its gross margin was 51.4%.
Shares fell 19.5% in afternoon trading, a small recovery after falling more than 21% previously.
During a conference call on Wednesday, Chief Financial Officer Jeff Hoffmeister said that while consumer spending in North America remains resilient, some weakness in Europe and a strong U.S. dollar are factored into his outlook.
from Europe economy revived slightly at the start of the year, recording 0.3% growth in the January-March quarter compared to the last three months of 2023. But the economy was held back by high inflation that undermined consumers’ purchasing power, and due to an energy crisis, rising prices related to Russia’s invasion of Ukraine.
In the first quarter, Shopify reported adjusted earnings of 20 cents per share on revenue of $1.86 billion. Analysts surveyed by Zacks Investment Research expected earnings of 16 cents per share on revenue of $1.84 billion.