Shopify Surges on Surprise Profit, Plans to Cut 20% of Staff, and Sale of Logistics Business

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Shopify

stock jumped in premarket trading Thursday after the e-commerce software company’s eventful first-quarter earnings report.

The company announced it was selling off its logistics business, will be cutting 20% of its workforce, and posted an unexpected profit in its first quarter.

Shopify

will be selling its logistics business to global logistics company Flexport. Under the transaction, Shopify will receive stock representing a 13% of equity interest in Flexport, on top of its existing equity interest. Flexport will become Shopify’s preferred logistics partner. Because Flexport is privately held, Shopify did not provide a monetary value, but the company’s total stake in Flexport is now in the high teens, said Shopify President Harley Finkelstein in a call with Barron’s.

Shopify also will be laying off about 20% of its staff across all its divisions, the company said, in a bid to streamline operations and bring the company back to basics. The company expects to incur a severance charge of up to $150 million in the second quarter tied to the workforce reduction.

“This is not something that any leader would like to do,” Finkelstein said. “It’s a pretty tough day around here. But what it means is on the other side of this at Shopify, we’ll be working together on a singular focus mission again.”

Shopify delved into logistics before the pandemic. It acquired warehouse solutions provider 6 River Systems for $450 million in 2019, and infrastructure software company Deliverr for $2.1 billion in 2022.

“Logistics was something that we didn’t necessarily want to get into, we sort of felt we had to in 2018 or 19,” Finkelstein said.

“Even though we felt that it wasn’t necessarily our core mission, we felt that it was better for us to do it than have merchants do it on their own,” he added.

Shares of Shopify surged 18% ahead of Thursday’s opening bell, while futures for the

Nasdaq Composite
ticked down 0.1% and the

S&P 500
fell 0.3%. The stock has risen 33% this year.

Shopify

(ticker: SHOP) also reported first-quarter earnings on Thursday. The company posted adjusted earnings of 1 cent a share, better than the Wall Street consensus forecast for a loss of 4 cents. Sales of $1.5 billion jumped 25% from the year-ago quarter, and were ahead of estimates of $1.4 billion.

Gross merchandise volume on the company’s platform, a key indicator for online retailers, increased 15% to $49.6 billion. Analysts were expecting that figure to come in at $47.7 billion.

The company also provided an update to its second-quarter guidance. Shopify now expects revenue to grow at a similar rate to the first quarter. Wall Street is currently projecting revenue could clock in at $1.57 billion for the June quarter, implying a 9% increase.

Write to Sabrina Escobar at [email protected]