Shopify’s shares tumble on weak outlook after a very strong start to 2024

Shopify’s shares tumble on weak outlook after a very strong start to 2024

Shopify shares plunged 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. predicts that revenue will increase by a high percentage rate for the second quarter, well below the 23% increase in the first quarter.

The e-commerce company expects quarterly gross margin to decline by about 50 basis points from the first quarter, when it was 51.4%.

Shares fell 19.5% in afternoon trading, a slight recovery after falling more than 21% earlier.

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.

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.

Meanwhile, consumers in the United States remain largely resilient, but other businesses have noticed a drop in customer spending.

Starbucks Inc. lowered its full-year sales and profit expectations in late April, following a disastrous quarter marked by slowing store visits around the world. In the United States, Starbucks saw a stronger and faster decline in consumer confidence and spending than expected.

The Conference Board, a business research group, said late last month that US consumer confidence has fallen for the third consecutive month in April as consumers continue to face high prices and interest rates.

McDonalds said late last month that it plans to increase offers and value messages to combat slowing sales.

The Chicago fast-food giant said inflation-weary customers are eating out less often in many major markets. In the first quarter, fast food traffic was flat or down in the United States, Australia, Canada, Japan, the United Kingdom and Germany.

The government is expected to release retail sales for April next week, which should provide more insight into purchasing behavior.

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AP Retail Writer Anne D’Innocenzio in New York contributed to this report.

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