Synopsis
Shopify anticipates second-quarter sales and profit to align with analyst forecasts. This projection indicates a slowdown in demand for e-commerce services. Retail businesses are facing increased costs, impacting their spending. Despite a strong first quarter, future growth faces challenges from economic uncertainties. Shopify's outlook reflects these evolving market conditions.Listen to this article in summarized format
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The tepid outlook knocked its U.S.-listed shares down more than 5% in premarket trading, overshadowing an upbeat first quarter fueled by resilient consumer spending, as seen in recent results by payment processing giants including Mastercard and Visa.
Businesses are now facing heightened economic uncertainties as the Middle East conflict pushes up gas prices and squeezes household budgets, with annual U.S. inflation hitting a three-year high in March.
For companies ranging from consumer goods giants and airline majors to small- and medium-sized retailers, which make up a large portion of Shopify's client base, the war in Iran has led to a surge in costs, prompting them to tighten spending.
The spike in costs coincides with retailers' efforts to recover from the impact of U.S. tariffs, which left many small businesses scrambling to secure alternative supply routes and caused some companies to lose out on sales.
This is a double whammy for Shopify, which primarily makes its revenue by taking a cut of merchant sales through payment processing fees, and by selling subscription plans to merchants.
The Ontario, Canada-based company expects second-quarter revenue to grow at a high-twenties percentage rate, while analysts expected a 26.8% increase, according to data compiled by LSEG.
Gross profit is expected to grow at a mid-twenties percentage range, compared with the estimate of a 24.6% increase.
Shopify's first-quarter revenue jumped 34% to $3.17 billion, while its adjusted per-share earnings came at 36 cents. Both topped analysts' expectations.
