Shopify Inc. SHOP-T reported double-digit revenue growth and solid profit for the fourth quarter, topping analyst expectations after a strong holiday season and a year of streamlining its work force.
The Ottawa-based company, which provides tools for businesses to run their stores online, said its revenue was US$2.1-billion for the quarter ended Dec. 31, 2023, up 24 per cent from the same period last year.
Shopify reported net income of US$657-million for the quarter, compared with a net loss of US$623-million a year earlier. “Other income,” including the fluctuating value of its stakes in other companies, made up about 60 per cent of income for the quarter.
Gross merchandise value – thetotal sales through its platform– increased 23 per cent to $75.1-billion over the quarter, representing the fifth consecutive quarter of accelerating growth, according to ATB Capital Markets analyst Martin Toner.
Jeff Hoffmeister, Shopify’s chief financial officer, told analysts Tuesday morning the revenue was driven by a strong Black Friday, Cyber Monday and holiday season.
Shopify said it expects revenue to grow “at a low-20s percentage rate,” or “in the mid-to-high-20s” when adjusting for the sale of the logistics business last June. In a Tuesday morning note to investors, Mr. Toner said the quarter underlined Shopify’s ability to “simultaneously grow and expand its bottom line.”
Last week, Shopify increased the price of its Plus subscription plan by 25 per cent, the first time it had done so since 2017. This was after it raised its Basicplan prices the year before for the first time in more than a decade. Despite that price hike, the company experienced little turnover.
But the company’s forecast for sales growth in the first quarter fell short of some expectations. Shares of Shopify closed down more than 12 per cent on the Toronto Stock Exchange on Tuesday.
“For a stock that’s had material appreciation over the past year, expectations were high going into the quarter and [fiscal year 2024], which meant there could be no disruption in trajectory – which is what we got with the company’s outlook,” National Bank of Canada analyst Richard Tse said in a note to investors.
Mr. Tse said the company’s guidance caused some hesitation for analysts related to its rising marketing spending, and concerns about operating leverage.
The company’s fourth-quarter operating expenses were down by 22 per cent compared with last year, owing to the sale of the company’s logistics business and a lower headcount, Mr. Hoffmeister said. The company also faced a real estate impairment charge last year.
However, operating costs are ticking back up quarter-over-quarter.
Last year, the company boosted its marketing spend to reach new customers. On Tuesday, management said it expects operating costs to increase by a “low teens” percentage rate next quarter, attributing roughly half of that expected increase to marketing costs.
This could dull the company’s operating leverage – the relationship between its fixed and variable costs – making it more difficult for Shopify to earn more profit by simply increasing its sales volume.
Shopify president Harvey Finkelstein defended the higher marketing costs, saying the company would continue to take opportunities that offered a good return.
The company has considerable room to grow.Shopify says it only has about 10 per cent of U.S. e-commerce market share right now, and a lower portion of the market in other countries.
The company’s share price has recuperated since last year, up 85 per cent since last February, but is still down about 50 per cent from all-time highs. In contrast, other tech companies such as Microsoft Corp., Meta Platforms Inc. and Nvidia Corp. were galloping to new highs in 2023.
Since last year, the company has attempted toregain the momentum it had early in the pandemic, cutting 20 per cent of its employees last summer as part of efforts to streamline. Although it had spent billions building a logistics business in order to compete with Amazon.com Inc., last year it reversed course, selling its warehousing operations to Silicon Valley-based Flexport Inc. and taking a 19-per-cent equity stake in the company, according to estimates from Canadian Imperial Bank of Commerce analyst Todd Coupland.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
