Holiday shopping, Black Friday hand Shopify US$657M Q4 profit and 24% revenue growth

By Tara Deschamps, The Canadian Press

A flurry of holiday sales saw Shopify Inc. end 2023 with strong revenue growth and profits even as consumers continued to grapple with inflation.

The Ottawa-based supplier of e-commerce software reported Tuesday a fourth-quarter profit of US$657 million compared with a loss of US$623 million a year earlier.

The firm, which keeps its books in U.S. dollars, said its revenue totalled US$2.14 billion for the period ended Dec. 31, up 24 per cent from US$1.74 billion a year earlier.

It attributed the increase to the Black Friday-Cyber Monday weekend and holiday season, which many expected to be marked with consumers being more careful about spending.

However, economic woes weighed little on the sales Shopify saw throughout the season.

The four-day period spanning Black Friday and Cyber Monday alone generated US$9.3 billion in sales for Shopify, amounting to 24 per cent growth from the prior year, Harley Finkelstein told analysts Thursday.

The company’s president said about 61 million consumers worldwide purchased from brands using Shopify, more than 17,500 merchants made their first sale over the Black Friday-Cyber Monday sales period and more than 55,000 merchants had their highest selling day ever on Shopify.

“Our platform handled a staggering 967,000 requests per second, which is the same as 58 million requests per minute, nearly 80 per cent higher than our peak traffic just two years ago,” he said.

Finkelstein has long likened Black Friday and Cyber Monday to the Super Bowl for Shopify.

Ahead of the shopping period this year, he told The Canadian Press he expected inflation, high interest rates and layoffs to make consumers more intentional about what they buy.

“I think ‘less but better’ is probably going to be one of the themes,” he said at the time.

“More quality, less quantity, not necessarily buying 15 pieces of product, but rather buy three that are more meaningful to you.”

When Statistics Canada reported November retail sales last month, it saw a 0.2 per cent decline, pushing some economists to declare the month a “Black Friday bust.”

Shopify’s earnings told a different story. Its profit amounted to 51 cents US per diluted share, up from a loss of 49 cents US per diluted share in the last three months of 2022.

On an adjusted basis, Shopify says it earned 34 cents US per diluted share, up from adjusted profit of seven cents US per share.

However, the results pushed Shopify’s share price down 12.54 per cent or $15.04 to close at $104.85.

Analysts, including Daniel Chan of TD Cowan, attributed the fall to the company’s guidance. The company expects overall revenue to grow at a low-twenties percentage rate on a year-over-year basis.

“We believe the stock is down about 12 per cent on lower-than-anticipated Q1 operating margin, whereas the investors were likely expecting continued expansion,” Chan wrote in a note to investors.

“Given the strong share price performance and high relative valuation, we are not surprised by the market reaction.”

The quarter also showed Shopify’s merchant solutions revenue rose to US$1.62 billion compared with US$1.34 billion a year earlier, boosted by increased sales by its merchants. Subscription solutions revenue was US$525 million, up from US$400 million.

Over the entire year, Shopify added 35 per cent more merchants from outside North America, Finkelstein said. Those merchants included U.K. clothing brand Boden and German housewares company Westwing.

“There are opportunities for us to go beyond Europe. Of course, we’ve talked about Latin America and the Asia-Pacific in the past, but we definitely see a lot of opportunity there,” Finkelstein said.

“I mean we’ve captured less than one per cent of market share in global retail sales, even as our product and geographies have expanded … We’ll continue to focus on international. We think we’re still underpenetrated there.”

This report by The Canadian Press was first published Feb. 13, 2024.

Companies in this story: (TSX:SHOP)

Tara Deschamps, The Canadian Press

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