Shopify earnings: Retail might have changed forever
Shift to ecommerce drives a 47% YoY rise in revenue
- Q1 revenue: $470 million (+47% YoY, vs. $443 million expected)
- Q1 earnings: $31.4 million net loss (up from -$24.2 million Q1 2019, above expectations)
- Guidance: Shopify previously withdrew its financial guidance in April.
The big number: Shopify's key metric is gross merchandise volume (GMV): the total value of everything sold on Shopify. That was up 46% year-on-year, to $17.4 billion, above the $16.9 billion analysts expected. The company told investors that GMV growth accelerated in April, too, though it warned that "it is unclear how sustainable consumer spending levels will be in this uncertain economic environment."
People are crying: During its earnings call, Shopify played a recording of a customer service call with a farmer that uses its platform. The farmer, audibly crying, said her farm would have gone out of business without Shopify. The recording was testament to Shopify's main pitch to investors right now: That it will get through this crisis by helping struggling businesses pivot to online.
Opportunities: So far, that strategy seems to be working, especially for existing merchants. Shopify said in-store sales through its platform were down 71%, but 94% of that had been recouped from online sales. And it highlighted its new Shop app, saying that it will boost customers' long-term value to the company by helping them find local retailers.
Threats: Though overall revenue held up, recurring revenue from subscriptions saw decelerating growth. That's because merchants downgraded to cheaper plans which don't include certain features, like abandoned cart recovery — a trend that could continue as the economy gets worse.
The power struggle: Shopify said that it's seeing "a lot of net new customers coming to the platform" — including customers that have never sold online before, such as Heinz and Lindt. It's pretty clear that this pandemic has accelerated brands' moves to online shopping, and for those that want to control the retail experience, Shopify is one of their only options. Investors certainly think it will benefit: Shopify is on the cusp of becoming Canada's most valuable stock.