Shopify plunged on Wednesday after the Canadian company that helps retailers with online sales warned of slowing revenue growth and shrinking margins in the current quarter.
This caught many investors off guard after the company rebounded strongly from the pandemic and started 2024 with a bang.
Shopify Inc. expects revenue to grow by a high-teens percentage rate in the second quarter, well below the 23% rise in the first quarter.
The e-commerce company expects quarterly gross margin to decline approximately 50 basis points from the first quarter, in which its gross margin was 51.4%.
Shares fell 19.5% in afternoon trading, a slight recovery after falling more than 21% earlier.
In a conference call Wednesday, Chief Financial Officer Jeff Hoffmeister said that while consumer spending in North America remains resilient, some weakness in Europe and a strong U.S. dollar are factored into his outlook.
Europe economy recovered slightly at the start of the year, recording growth of 0.3% in the January-March quarter compared with the last three months of 2023. But the economy has been held back by high inflation which has undermined power of consumer purchasing, and by an energy crisis. soaring prices linked to Russia’s invasion of Ukraine.
For the first quarter, Shopify reported adjusted earnings of 20 cents per share on revenue of $1.86 billion. Analysts polled by Zacks Investment Research expected earnings of 16 cents per share on revenue of $1.84 billion.
