Shopify stocks plunge amid layoffs as CEO admits, “I got it wrong’

At the height of the COVID-19 crisis, many companies associated with online spending predicted that the pandemic would permanently change the growth trajectory of e-commerce for the better as people build new online shopping habits.

Now Shopify Inc. shopping ,
-14.06%
He became the last to admit that his expectations might have gotten out of hand.

The e-commerce company announced Tuesday that it plans to lay off about 10% of its staff as it adapts to the evolving landscape. CEO Toby Luttke said in a blog post that Shopify will notify employees Tuesday and that it expects the layoffs to primarily affect its staffing, support and sales teams, although the effects will be felt across the company such as Shopify’s “hyperspecialized goals and duplicate roles, as well as Some collections that would have been convenient to have but are too far from creating the products.”

Shares were down 15% in morning trading on Tuesday.

Lütke explained that Shopify has “always been a company making the big strategic bets that merchants demand of us” and that as the epidemic of e-commerce habits has accelerated, the company is “betting the channel mixes – the share of dollars traveling through e-commerce rather than physical retail – It will permanently jump forward by 5 or even 10 years.”

Now, Shopify is seeing the e-commerce spending mix back where it was expected using pre-COVID forecasts. “It’s now clear that the bet didn’t pay off,” Luttke said. “In the end, placing that bet was my call to make and I got this wrong. Now, we have to adapt.”

e-commerce mix is[s]So it grows steadily, but it wasn’t a meaningful five-year leap.”

Shopify plans to provide affected employees with 16 weeks of severance pay plus an additional week of pay for each year they have been with the company.

Colin Sebastian, an analyst at Baird, wrote that the layoffs represented an “important change in direction for a company that was still guiding ‘strict’ hiring plans through early May.”

“With many investors concerned about the original level of spending planned this year, the bright side of the bad news today is that Shopify management must now focus more on operating efficiency,” Sebastian continued.

Shopify shares have lost 80% in the past 12 months as the S&P 500 SPX,
-1.15%
11%.

The company is scheduled to announce its second-quarter results on Wednesday morning. The fellow e-commerce player Amazon.com Inc. AMZN,
-5.23%
On the agenda on Thursday afternoon.

PayPal Holdings Inc. PYPL,
-5.65%And the
Another e-commerce related company, another earnings name will be worth watching when the company publishes its results next Tuesday. PayPal lowered its pandemic-era growth forecast earlier this year.

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