Business

Shopify shares jump after web-retail supplier reports soaring 4th-quarter sales

Shopify Inc.'s stock shoots to a record high after the e-commerce company reports 47 per cent revenue growth compared with the same quarter last year.

Ottawa-based tech company's sales and profit top expectations

Shopify's 2019 fourth-quarter turnaround beat analysts' expectations. (Chris Wattie/Reuters)

Shopify Inc.'s stock shot to a record high Wednesday after the e-commerce company reported 47 per cent revenue growth compared with the same quarter last year.

The Ottawa-based retail technology business saw its stock spike by almost 20 per cent to $786.07 Cdn in early trading Wednesday on the Toronto Stock Exchange. By noon, shares had settled to $730.31, about 11.5 per cent higher than Tuesday's close of $655.46.

The jump came after Shopify, which keeps its books in U.S. dollars, reporting that its sales totalled nearly $505.2 million US for the three-month period that ended Dec. 31, up from about $343.9 million a year earlier.

Shopify executives said on a call with analysts that the revenue lift was courtesy of holiday sales, new currency and payment features and a slew of new merchants using its software, including entertainment giant Cirque du Soleil, apparel retailer Mark's, rapper Travis Scott and footwear brand Toms.

It came as the company has been busy getting ready to go head-to-head with Amazon.com Inc. with a network of fulfillment centres Shopify is building in the U.S. to help merchants lower shipping costs and ensure quick deliveries.

Shopify chief financial officer Amy Shapero said Wednesday that the company has set aside "small portion" of a $1 billion pool of cash allocated for the network for a research and development centre it will open in Ottawa.

The centre will allow employees to trial new warehousing, robotics and fulfilment technology, but will only be staffed by a "minimal number of employees," a Shopify spokesperson told The Canadian Press later.

Despite only rolling out the network in the U.S., the company said that it will be using the new centre for fulfilling a "limited" number of orders in Canada later this summer.

"We don't just want to make plans from the periphery," said Harley Finkelstein, Shopify's chief operating officer.

"We actually want to get into it and really figure out what we need to do, and so the best way for us to do that, as Shopify's always has always done is get our hands dirty and get into the trenches."

To help with such research and development, Shopify acquired 6 River Systems Inc., a Massachusetts-based company that specializes in warehouse automation powered by robots and artificial intelligence.

"Even though we are happy with our initial progress, it's important to remember that we are in the early stages of a five-year plan for the Shopify Fulfillment Network. Our merchants need us to get this right and that will take time," Finkelstein said.

Aside from the centre, Shopify is planning to hire 1,000 people in Vancouver and open its first permanent office there. It has also announced that it will lease space at the Well complex under construction in at Front Street and Spadina Avenue in Toronto.

Both are signs of the immense growth that Shopify — long considered Canada's tech darling — has undergone in recent years. The company has racked up more than one million merchants using its offering.

Back from loss

In 2019, the number of merchants on the Shopify platform achieving over $1 million in gross merchandise value — a term used to measure sales — grew by 44 per cent and the number of consumers buying from its merchants shot up by 37 per cent to hit nearly 300 million.

In its last quarter, the company reported a profit of $771,000, compared with a loss of $1.5 million. That amounts to a penny per share compared with a loss of a penny for the last three months of 2018.

Shopify also said its adjusted net income for the quarter amounted to $50.0 million or 43 cents per share, compared with adjusted net income of $29.4 million or 27 cents per share for the fourth quarter of 2018.

Analysts on average had expected an adjusted profit of 24 cents per share, according to financial markets data firm Refinitiv.

Shopify now expects a first-quarter revenue between $440 million and $446 million and full-year revenue in a range of $2.13 billion to $2.16 billion.

With files from CBC News