Shopify Q4 loss narrows with help of cannabis e-commerce offerings
Shopify Inc.’s loss narrowed in the fourth quarter as it began powering provincial and private marijuana e-commerce offerings and continued its push to grow its merchant base.
The e-commerce software company reported Tuesday a fourthquarter loss of US$1.5 million compared with a loss of US$3 million in the same quarter a year earlier. The company, which keeps its books in U.S. dollars, said the loss amounted to a penny per share for the quarter ended Dec. 31 compared with a loss of three cents per share a year earlier.
The quarter was the first to include the legal sale of recreational cannabis in Canada. Shopify helped power the online stores of several retailers with Ontario, B.C. and pot purveyor Tweed, among the provinces and brands to rely on the company.
Shopify chief operating officer Harley Finkelstein hinted on a call with analysts that the platform’s ability to cope with the surge in demand for the substance could bode well for the company ’s future. “The Canadian cannabis push was really not only just to get a foothold in the Canadian market, but also ensure that we have a really good position globally as things begin to decriminalize,” said Finkelstein.
“It also positioned us ... to be the first phone call that any other country thinks about when they ’re thinking about regulating or allowing cannabis sales to the consumer to be allowed.” Finkelstein also used the call to trumpet the company’s 54-percent spike in revenues, which jumped from US$222.8 million in the last three months of 2017 to US$343.9 million for the latest quarter.
On an adjusted basis, Shopify reported a profit of 26 cents per share, up from an adjusted profit of 15 per share in the fourth quarter of 2017.
Analysts on average had expected a profit of 20 cents per share, according to Thomson Reuters Eikon.
Finkelstein attributed the increase to merchant success, pointing out that Procter & Gamble, General Mills and Steve Madden were among the handfuls of new companies to join the ranks of Shopify’s 5,300 merchants in the last quarter.
Revenues for the year surged 59 per cent to a record US$1.073 billion, up from the consensus estimate of US$1.06 billion.
The result means Shopify joins the handful of locally headquartered firms that have crashed through the US$1-billion annual sales mark.
More impressively, the e-commerce specialist managed this feat just 14 years after its founding above an Elgin Street coffee shop in Ottawa and 12 years after launching its e-commerce business. Looking ahead, the company said it expects its revenue to be between US$1.46 billion and US$1.48 billion for 2019 and an operating loss between US$140 million and US$150 million for the year. The company’s ability to attract large merchants like the brands Finkelstein mentioned has been in the spotlight ever since the company came under attack from short seller Andrew Left, when he targeted it just over a year ago. Left claimed Shopify relied too heavily on small merchants whose future business was uncertain and called on it to release more data around customer “churn.” Shopify has offered little insight around its churn, but does publicize its gross merchandising volume (GMV), a number that measures merchandise sold through the company and hints at the company’s ability to retain merchants and customers.
Shopify said its fourth-quarter GMV grew by US$4.9 billion to reach US$14 billion for the fourth quarter and US$41 billion for 2018. Shopify said Tuesday its head count now tops 4,000, with Toronto emerging as a significant force. Indeed, it’s likely Shopify’s Toronto workforce will exceed that of Ottawa later this year, a reality reflected in the company’s recent decision to move ahead with a major new office tower at the corner of Front Street West and Spadina Avenue in Toronto’s downtown core.
Shopify shares slipped as much as seven per cent in early morning trading before retracing their steps. They ended the day at $232.37, up 1.12 per cent in Toronto trading.