Shopify shares were tumbling Tuesday after the e-commerce company joined a growing list of tech companies laying off workers in response to a challenging macroeconomic environment.
The company will be culling about 1,000 workers, or 10% of its workforce, starting Tuesday, the company said in a memo mailed out to staff. Shopify (ticker: SHOP
) will cut jobs across all divisions, but the layoffs will be concentrated in recruiting, support, and sales, the company said.
Shopify was down 16.5% to $30.72 on Tuesday.
In the memo, Chief Executive Tobi Lütke said the move was a response to slowing revenue growth as consumers pulled back on online shopping, reverting instead to in-person purchases as the reopening progressed. During the pandemic, the company bet that it would accelerate e-commerce growth by as much as 10 years, and expanded the company to match the demand, Lütke wrote.
“Placing this bet was my call to make and I got this wrong,” Lütke wrote. “Now, we have to adjust. As a consequence, we have to say goodbye to some of you today and I’m deeply sorry for that.”
Shopify is the latest tech company to announce layoffs or a cutback in hiring plans over the last year. The list includes Netflix ( NFLX
), Tesla ( TSLA
), and Carvana (CNVA). In early July, Microsoft (MSFT) said it was trimming a little less than 1% of its workforce as part of a strategic realignment, while Meta Platforms (META) announced the company was planning on scaling back its recruitment plans for the rest of the year.
The round of layoffs will cement investors’ fears heading into Shopify’s second-quarter earnings, which are slated to be released ahead of the opening bell on Wednesday. The company missed earnings expectations in the previous quarter, even as sales came in mostly in-line with estimates. The stock has fallen more than 77% this year.
“Shopify’s Q2 results are likely to be impacted by a continuation of e-commerce normalization and fresh new economic headwinds,” wrote Citi analyst Tyler Radke in a research note. He expects revenue to decline and operating margins to be slightly below the breakeven point for the quarter.
The analyst cut his price target on the stock to $37 from $43.20 and maintained a Neutral/High Risk rating. Most analysts — 51% — have a Hold rating on the shares, while 44% continue to rate it a Buy and 5% rate it a Sell, according to FactSet.
Write to Sabrina Escobar at [email protected]
