Shopify is laying off about 1,000 employees, the Wall Street Journal was first to report Tuesday, citing an internal memo sent by CEO Tobi Lütke.
According to the memo, which Shopify posted to its corporate website, the cuts are being made because Shopify mistakenly believed that the e-commerce bump fueled by the Covid-19 pandemic would continue.
"When the Covid pandemic set in, almost all retail shifted online because of shelter-in-place orders. Demand for Shopify skyrocketed," wrote Lütke.
"Shopify has always been a company that makes the big strategic bets our merchants demand of us — this is how we succeed," he continued. "We bet that the channel mix — the share of dollars that travel through e-commerce rather than physical retail — would permanently leap ahead by 5 or even 10 years. We couldn't know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match."
"It's now clear that bet didn't pay off," Lütke wrote. "Ultimately, placing this bet was my call to make and I got this wrong."
Recruiting, support, and sales hit hard
Lütke wrote in the memo that most of the layoffs would affect roles in recruiting, support, and sales.
"Across the company we're also eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products," he wrote.
He added that affected employees would receive 16 weeks of severance, "plus an additional week for every year of tenure at Shopify."
Shopify saw outsized growth during the pandemic. In 2020, its business essentially doubled, and it reported 57% revenue growth for 2021, up to $4.6 billion. Its gross merchandise volume — or the total value of sales conducted on the platform — grew 47% year over year. The company set an ambitious goal of making 2,021 technical hires in 2021.
But that trend of explosive growth has since slowed, and its stock has tumbled from its pandemic highs. Since April, the company has laid off about 50 employees, canceled some fall internships, and delayed a compensation overhaul it had planned for all employees. The compensation overhaul was announced after some employees expressed concerns that the total value of their compensation had been hurt by Shopify's plummeting stock price.
Shopify also instituted a 10-for-1 stock split at the end of June in an attempt to boost investor interest in the hard-hit stock.
The company is set to report second-quarter earnings on Wednesday morning.
Shopify is far from the only tech company to conduct layoffs as the global economy has faltered in recent months. According to Crunchbase News, which has been tracking layoffs in tech, more than 30,000 tech workers in the US have been laid off in 2022.
Canada's tech scene is being affected as well — the Canadian fintech darling Wealthsimple recently laid off 159 people or about 13% of its workforce.
General Motors Co. GM -3.33% ’s net profit tumbled 40% in the second quarter, hurt by a loss in China and supply-chain troubles that left the company with tens of thousands of unfinished vehicles it couldn’t sell during the period.
GM executives reaffirmed the auto maker’s full-year profit outlook, saying they expect production to increase sharply in the second half as the computer-chip shortage eases, and that consumers continue to pay top dollar for new vehicles.
Still, the nation’s largest automaker by sales on Tuesday missed analysts’ profit projections, after warning earlier this month that a drop in North American factory output would hit quarterly results.
Chief Executive Mary Barra said GM is taking precautions to guard against weakening economic conditions, including curtailing some hiring. Executives said layoffs weren’t in the plans for now but said they are preparing a range of actions to respond if challenges worsen.
“We’ve run many different scenarios,” Ms. Barra told analysts. “We know the steps we would take if the situation went in a different direction.”
The Detroit-based car company said second-quarter revenue rose about 5% to $35.76 billion. Net income for the April-to-June period totaled $1.69 billion, down from $2.84 billion a year earlier.
GM reported pretax earnings per share of $1.14 in the second quarter, below the average analyst estimate of $1.23, according to FactSet.
GM shares fell about 3% in morning trading, a sharper drop than the broader market.
Ms. Barra told analysts during a conference call that GM’s vehicle inventories remain extremely tight and there is no sign that pent-up demand for new cars is waning after two years of tight dealership stocks.
“The customers are there for our vehicles,” she said. “They’ve been waiting, and all indications are they remain ready to buy.”
GM said early this month that a shortage of computer chips and other parts prevented the company from shipping 95,000 vehicles to dealers. Company executives said Tuesday that they still expect to clear the backlog during the second half of the year as more parts become available and it is able to complete assembly of the partially finished vehicles.
The automaker on Tuesday stood by its forecast for the full year of $9.6 billion to $11.2 billion in net profit.
Pressure surfaced in other parts of GM’s business, too, including in China, the company’s second-largest market, where its joint-venture business posted a rare loss of $87 million. The pretax profit margin in North America, which drives the bulk of GM’s bottom line, fell to 8%, from 10.4% a year earlier.
GM finance chief Paul Jacobson blamed the China loss on Covid-19 lockdowns and said the business is bouncing back.
“We see that as somewhat temporary,” he said of the weaker financial performance. “We continue to see big things for China.”
Ms. Barra said the company is cutting discretionary spending and limiting hiring. She said that restructuring in 2019 and 2020 cut about $4.5 billion in annual costs, helping prepare GM for any downturn.
Across town, Ford F -2.53% is preparing to cut several thousand salaried jobs in North America to improve its cost structure as it prepares for a long-term transition to electric vehicles, The Wall Street Journal reported last week.
GM increased spending on electric vehicles, which contributed to a 43% drop in free cash flow in the quarter, to $1.4 billion. Capital expenditures, which are largely targeted at EV development, rose by about one-third, to $2 billion in the second quarter.
Separately, GM said it struck agreements with outside suppliers—South Korea’s LG Chem 051910 1.98% and Philadelphia-based Livent Corp. LTHM -0.96% —to secure raw materials needed to build electric-vehicle batteries. The pacts will help the company lock up enough battery capacity to hit its goal of one million electric vehicles in North America by 2025, GM said.
Cathodes use lithium, nickel, and other materials that account for about 40% of the total cost of a battery, GM said.
GM and other automakers have been taking pains to disclose more to Wall Street about how they plan to put the industrial pieces in place to mass-produce electric cars. Investor enthusiasm for EV-related stocks soared last year amid signs that battery-powered vehicles are poised for strong growth. Since then, shares in EV makers have pulled back sharply, in part because of missed production forecasts.
Ford last week outlined several steps it is taking to boost the production of batteries and electric models, including an agreement to source iron-based batteries from China’s Contemporary Amperex Technology Co. 300750 0.05%
Ford reports second-quarter results Wednesday, followed by global automaker Stellantis STLA -1.83% NV, which plans to release its latest earnings report early Thursday.
Analysts have raised questions about whether a future battery shortage could curb the auto industry’s EV ambitions. Both GM and Ford have said they aim to overtake Tesla Inc. TSLA -by 3.83% in U.S. electric-vehicle sales.
Meanwhile, traditional car companies face a host of challenges in their core business of building internal-combustion-engine cars, which still fuel nearly all of their profits.
Rising interest rates could dampen consumer demand, while higher raw-material costs are eroding profits and leading car companies to raise vehicle prices. The computer-chip shortage continues to scramble auto makers’ production schedules, complicating efforts to replenish depleted dealership lots.
With inventory levels near all-time lows, the average price paid for a new vehicle in the U.S. hit a record of about $45,800 in June, nearly 15% higher than a year earlier.
General Motors Co. GM -3.33% ’s net profit tumbled 40% in the second quarter, hurt by a loss in China and supply-chain troubles that left the company with tens of thousands of unfinished vehicles it couldn’t sell during the period.
GM executives reaffirmed the auto maker’s full-year profit outlook, saying they expect production to increase sharply in the second half as the computer-chip shortage eases, and that consumers continue to pay top dollar for new vehicles.
Still, the nation’s largest automaker by sales on Tuesday missed analysts’ profit projections, after warning earlier this month that a drop in North American factory output would hit quarterly results.
Chief Executive Mary Barra said GM is taking precautions to guard against weakening economic conditions, including curtailing some hiring. Executives said layoffs weren’t in the plans for now but said they are preparing a range of actions to respond if challenges worsen.
“We’ve run many different scenarios,” Ms. Barra told analysts. “We know the steps we would take if the situation went in a different direction.”
The Detroit-based car company said second-quarter revenue rose about 5% to $35.76 billion. Net income for the April-to-June period totaled $1.69 billion, down from $2.84 billion a year earlier.
GM reported pretax earnings per share of $1.14 in the second quarter, below the average analyst estimate of $1.23, according to FactSet.
GM shares fell about 3% in morning trading, a sharper drop than the broader market.
Ms. Barra told analysts during a conference call that GM’s vehicle inventories remain extremely tight and there is no sign that pent-up demand for new cars is waning after two years of tight dealership stocks.
“The customers are there for our vehicles,” she said. “They’ve been waiting, and all indications are they remain ready to buy.”
GM said early this month that a shortage of computer chips and other parts prevented the company from shipping 95,000 vehicles to dealers. Company executives said Tuesday that they still expect to clear the backlog during the second half of the year as more parts become available and it is able to complete assembly of the partially finished vehicles.
The automaker on Tuesday stood by its forecast for the full year of $9.6 billion to $11.2 billion in net profit.
Pressure surfaced in other parts of GM’s business, too, including in China, the company’s second-largest market, where its joint-venture business posted a rare loss of $87 million. The pretax profit margin in North America, which drives the bulk of GM’s bottom line, fell to 8%, from 10.4% a year earlier.
GM finance chief Paul Jacobson blamed the China loss on Covid-19 lockdowns and said the business is bouncing back.
“We see that as somewhat temporary,” he said of the weaker financial performance. “We continue to see big things for China.”
Ms. Barra said the company is cutting discretionary spending and limiting hiring. She said that restructuring in 2019 and 2020 cut about $4.5 billion in annual costs, helping prepare GM for any downturn.
Across town, Ford F -2.53% is preparing to cut several thousand salaried jobs in North America to improve its cost structure as it prepares for a long-term transition to electric vehicles, The Wall Street Journal reported last week.
GM increased spending on electric vehicles, which contributed to a 43% drop in free cash flow in the quarter, to $1.4 billion. Capital expenditures, which are largely targeted at EV development, rose by about one-third, to $2 billion in the second quarter.
Separately, GM said it struck agreements with outside suppliers—South Korea’s LG Chem 051910 1.98% and Philadelphia-based Livent Corp. LTHM -0.96% —to secure raw materials needed to build electric-vehicle batteries. The pacts will help the company lock up enough battery capacity to hit its goal of one million electric vehicles in North America by 2025, GM said.
Cathodes use lithium, nickel, and other materials that account for about 40% of the total cost of a battery, GM said.
GM and other automakers have been taking pains to disclose more to Wall Street about how they plan to put the industrial pieces in place to mass-produce electric cars. Investor enthusiasm for EV-related stocks soared last year amid signs that battery-powered vehicles are poised for strong growth. Since then, shares in EV makers have pulled back sharply, in part because of missed production forecasts.
Ford last week outlined several steps it is taking to boost the production of batteries and electric models, including an agreement to source iron-based batteries from China’s Contemporary Amperex Technology Co. 300750 0.05%
Ford reports second-quarter results Wednesday, followed by global automaker Stellantis STLA -1.83% NV, which plans to release its latest earnings report early Thursday.
Analysts have raised questions about whether a future battery shortage could curb the auto industry’s EV ambitions. Both GM and Ford have said they aim to overtake Tesla Inc. TSLA -by 3.83% in U.S. electric-vehicle sales.
Meanwhile, traditional car companies face a host of challenges in their core business of building internal-combustion-engine cars, which still fuel nearly all of their profits.
Rising interest rates could dampen consumer demand, while higher raw-material costs are eroding profits and leading car companies to raise vehicle prices. The computer-chip shortage continues to scramble auto makers’ production schedules, complicating efforts to replenish depleted dealership lots.
With inventory levels near all-time lows, the average price paid for a new vehicle in the U.S. hit a record of about $45,800 in June, nearly 15% higher than a year earlier.