Shopify Will Cut 10% of Its Staff, With Most Workers Gone by Day’s End

Derek Decloet, Bloomberg News

Signage on Shopify headquarters in Ottawa, Ontario, Canada, on Thursday, Feb. 17, 2022. Canadian e-commerce company Shopify Inc. had the average price target on its shares slashed to the lowest level since January 2021 after it signaled slower sales growth. , Bloomberg

(Bloomberg) -- Canadian e-commerce firm Shopify Inc. will cut about 10% of its workforce today, as Chief Executive Officer Tobi Lutke acknowledged the company’s decision to expand rapidly coming out of the Covid-19 pandemic didn’t pay off.

Most of the affected roles are in recruiting, support and sales, Lutke said in a memo posted on the company’s website. Shopify tumbled about 14% to $31.60 in premarket trading as of 9:19 a.m. New York time.

“We bet that the channel mix -- the share of dollars that travel through e-commerce rather than physical retail -- would permanently leap ahead by five or even 10 years” because of the pandemic, Lutke wrote.

“It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point.”

About 1,000 workers will be affected, according to the Wall Street Journal, which was the first to report the memo.

Shopify shares have fallen 73% this year as of Monday’s close, as online sellers face significant headwinds now that shoppers are returning to physical stores. 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 tomorrow.

Analysts expect $1.33 billion in revenue for the period ended June 30, up just 11% from the first quarter.

(Updates pre-market share move and other additional information)