Despite the boom in online sales due to the pandemic, Shopify, the Canadian e-commerce company, will cut 10% of its workforce this Tuesday. Tobi Lütke, its chief executive, acknowledged that the company’s decision to expand rapidly after the pandemic did not pay off.
This will mean the reduction of 1,000 jobs of the approximately 10,000 that the company has. Most of the affected employees are from the areas of recruitment, support and sales. In turn, Lütke mentioned that “over-specialized” and duplicate positions will be eliminated, as well as groups that were convenient but not essential.
“Now it is clear that the bet did not pay off. What we see now is that the mix is returning to roughly what the pre-Covid data would have suggested it should be at this point,” the CEO shared.
Lütke mentioned that employees will receive 16 weeks of pay and, additionally, one week of pay for each year worked at the company. In turn, they will also offer advice to help their employees find another job and facilities to replace the work computer with a personal one.
For this, Shopify plunged as much as 16% to $30.66, marking its biggest drop in nearly three months according to The Ottawa-based company’s first-quarter results fell well short of expectations, and analysts have cut its estimates for second-quarter results, which are released on Wednesday.
In turn, revenue of $1.33 billion is projected for the period ending June 30, an increase of just 11% from the first quarter.
The economic crisis hits even
Shopify is not the only company that has been hit hard in its actions. Other companies include Netflix, Pinterest, Twitter, Meta and Alphabet.
In its second quarterly report, Netflix reported that it lost 970,000 subscribers, although its shares rose 6% after the report.
Pinterest plummeted 12.2% while Snapchat revealed that it earned $1.11 billion in revenue, compared to $982 million in the same period in 2021, representing a 13% increase from the previous year.
On the other hand, Twitter’s revenue fell 1% to $1.18 billion in the second quarter, which is attributed to the controversies with Elon Musk.
Meta, which owns Facebook, fell 5.8%, and Alphabet, which owns Google and also sells online ads, lost 3%.
“If you want proof that companies are nervous about the economic outlook, just look at media platforms and marketing agencies bemoaning a tougher ad market,” Russ Mould, chief investment officer at AJ Bell.
With information from Bloomberg
