Canadian tech giant Shopify Inc.’s share price fell by more than 14 per cent Tuesday after revealing it will lay off 10 per cent of its workforce because the company misjudged the growth of the e-commerce sector.
The Ottawa e-commerce company’s stock closed at $40.69 after chief executive Tobi Lütke said in a blog post that most of the staff impacted by the cut work in recruiting, support and sales.
Shopify will also eliminate “overspecialized and duplicate” roles as well as groups that Lütke said were “convenient to have but too far removed from building products.”
Shopify did not share a total number of workers affected by the cuts, but its most recent management information circular shows it ended 2021 with 10,000 employees and contractors, including 3,000 added last year alone. Ten per cent of that total would encompass 1,000 workers.
The company is carrying out the cuts because the COVID-19 pandemic created a surge in demand for Shopify’s software as consumers shifted to making a higher number of purchases online, Lütke said.
Shopify bet the amount of shopping people did online instead of at brick-and-mortar retailers would leap ahead by five or 10 years from pre-pandemic predictions.
“We couldn’t know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match,” Lütke said.
“It’s now clear that bet didn’t pay off.”
Shopify has recently seen people are reverting to pre-pandemic shopping habits. While e-commerce is still growing steady, Lütke said it doesn’t amount to a five-year leap ahead, forcing Shopify to make cuts.
“Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust,” said Lütke.
“As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”
Incorrect assumptions are largely to blame for Shopify’s follies, said Neil Saunders, managing director of GlobalData, in a note to investors.
“Put bluntly, this was a huge strategic mistake that was driven by an insufficient understanding of customer behaviour, a lack of rigour in analyzing the market, and a bit of hubris,” he said.
Yet Shopify is not alone in laying off workers. Over the last few months, Wealthsimple, Klarna, Twitter and Netflix have all shed staff as investor exuberance around tech stocks has faded, inflation has soared to an almost 40-year high and recession rumours have loomed.
Data aggregator Layoffs.fyi has counted 401 global startups that have laid off a collective 57,552 employees so far this year.
Amid a broad market sell-off that has particularly weighed on the tech sector, the price of Shopify’s stock has sunk more than 78 per cent since its late 2021 peak of $222.87. The company completed a 10-for-one share split earlier this year.
The cuts coupled with Shopify’s recent performance increases the likelihood the company will lower its outlook, when it releases its latest earnings Wednesday.
RBC Capital Markets analyst Paul Treiber told investors that he expected Shopify to revise its full-year expectations. The company previously suggested the number of merchants using Shopify’s software would be comparable to that of 2021 and that merchant solutions revenue growth would be more than twice the rate of subscription solutions revenue growth on a year-over-year basis.
Those affected by Tuesday’s layoffs will get 16 weeks of severance pay, plus an additional week for every year of tenure at Shopify. The company will also remove any equity cliff — a minimum amount of period workers have to stay at a company before they can start receiving equity.
Laid off workers will get access to career coaching, interviewing support, resume crafting services and Shopify will cover some of their internet costs during the severance period.
Workers will also be able to keep their home office furniture the company gave them a stipend for earlier in the pandemic and will give a “kick-start allowance” that can be used to buy new laptops.
But Shopify needs to do more than cut workers, Saunders argued.
He wrote, “With Amazon ramping up its services to merchants and opening its solutions to businesses that are not part of its platform, Shopify needs to work harder to appeal to new businesses and retain those existing clients using its services.”
This report by The Canadian Press was first published July 26, 2022.
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
