An employee works at Shopify’s headquarters in Ottawa, Ontario in Canada.
Chris Wattie | Reuters
Shopify on Tuesday reported better-than-expected sales for the fourth quarter but missed on earnings. The company’s shares fell more than 2% in morning trading.
Here’s how the company did:
- Earnings: 39 cents per share adjusted vs. 43 cents per share expected by LSEG
- Revenue: $2.81 billion vs. $2.73 billion expected by LSEG
Shopify forecast revenue in the first quarter to grow at a mid-20% percentage rate, which is roughly in line with analysts’ expectations of 24.4% revenue growth, according to LSEG.
“We expect the strong merchant momentum from Q4 to carry over into Q1, recognizing that Q1 is consistently our lowest [gross merchandise volume] quarter seasonally,” the company said in its earnings release.
Analysts at Wedbush wrote in a Tuesday note that while Shopify’s first-quarter guide was in line with the firm’s estimates, the outlook implies that year-over-year revenue growth will decelerate to the mid-20% range from 31% growth in the fourth quarter.
“We expect guidance reflects the lapping of leap day, [foreign exchange] headwinds, and some level of conservatism as management delivered 4Q growth 200 [basis points] above the high end of its guidance range,” the analysts wrote. Wedbush has an outperform rating on Shopify’s stock.
Shopify’s earnings report comes as the e-commerce industry continues to digest the impact of President Donald Trump’s recently announced tariffs on the country’s top three trading partners. Trump also closed a nearly century-old trade loophole called de minimis that is frequently used by Chinese online retailers.
On Friday, Trump signed an executive order that temporarily restored the de minimis trade rule, after the sudden shift disrupted customs processes and U.S. Postal Service operations.
Shopify President Harley Finkelstein, on a call with investors, called the de minimis exception a “crucial” tool for small businesses that ship overseas to keep costs down and “compete on a much larger scale.” He also called for greater reforms to the de minimis rule.
“I think rather than eliminating de minimis, countries should really try to streamline these custom processes and improve digital duty collection to make things a lot easier,” he told analysts.
Finkelstein added that entrepreneurs are likely to be impacted by the new tariffs. Shopify merchants can display any additional duties they may have to charge shoppers at checkout, he said.
The first quarter includes the results of the holiday shopping season. Online spending jumped nearly 9% to $241.1 billion in November and December, according to data from Adobe Analytics, which tracks sales on retailers’ websites. That was slightly higher than analysts’ forecast for sales of $240.8 billion.
The company said it expects operating expense as a percentage of revenue to be 41% to 42% in the current quarter. That’s a step up from 31.5% in the fourth quarter.
Net income nearly doubled to $1.3 billion, or 99 cents per share, from $657 million, or 51 cents per share, a year ago.
Revenue in the fourth quarter jumped 31% from $2.14 billion in the same quarter a year earlier.
Gross merchandise volume, or the total volume of merchandise sold on the platform, came in at $94.5 billion. Analysts surveyed by FactSet were looking for GMV of $93 billion.
Shopify sells software for merchants who run online businesses as well as services such as advertising and payment processing tools. The company has made its name as a platform for small businesses and direct-to-consumer brands to launch online storefronts. More recently, it has looked to attract bigger customers, such as Reebok, Mattel and Barnes & Noble, as a way to boost its growth.
