Canada's Shopify Inc is struggling with an unexpected sales downturn due to a post-pandemic online shopping slowdown. As a result, the e-commerce firm laid off 10 percent of its staff or about 1,000 employees.
After the announcement, shares of Shopify tumbled 15 percent — the biggest intraday fall in three months. This comes on the heels of a series of cutbacks in the tech sector, with Wall Street distancing itself from some of the fast-growth companies that flourished over the past two years.
'Bet didn't pay off’
Tobias Tobi Lütke, the founder and CEO, in a note sent to the organisation, said that the company took some bets on the online boom in shopping triggered by the pandemic, but the bet clearly didn't pay off. The company anticipated that COVID-19 would accelerate the entrenchment of e-commerce sales by five or even 10 years and the company expanded to match those expectations.
Shopify sales leapt 86 percent between 2019 and 2020, and another 57 percent jump, to $4.61 billion, in 2021. By May, however, the company warned of slower revenue growth as the pandemic boom faded.
Lütke's email mentions that job cuts would be made across recruiting, support and sales departments. The company said it's also eliminating over-specialised and duplicate roles, as well some groups that were convenient to have but too far removed from building products.
The company said employees who were fired would get 16 weeks of severance pay, plus an additional week for every year of tenure.
This also led to a string of reactions on social media with sacked Shopify employees taking to Twitter to tell their stories and companies reaching out to help them.
Another employee tweeted: "6.5 years at Shopify coming to an end today. What a wild ride, thankful for all the lifelong friends I’ve made."
Some employees looked at it as a new oppurtunity
However, others said they don't have the luxury to take a break:
I just got laid off from @Shopify in an email. And they took my slack access away immediately. I dropping my kid off, so I don’t even know if I’ll have access to my computer.
The Ottawa-based company reported a huge profit miss in the first quarter, and analysts have cut their expectations for the second quarter results, which are scheduled for today (Wednesday).
Walmart profit warning spooks investors
In other news, Walmart Inc. lowered its profit outlook for the second quarter and the full year, saying that shoppers are forced to cut back on discretionary items, particularly clothing, that carry higher profit margins, as inflation bites household budgets.
The shares of Walmart declined by as much as 8 percent and the Walton family - Walmart's owners - lost $11.4 billion on Tuesday, according to Forbes.
