Shopify drops 14% after company plans to lay off 10% of employees

An employee works at Shopify headquarters in Ottawa, Ontario, Canada.

Chris Watty | Reuters

Shopify lays off about 1,000 employees, or about 10% of its global workforce, the company announced Tuesday.

Shopify shares closed up 14%.

In a memo to employees, CEO Toby Lütke acknowledged that he had misjudged how long the pandemic-driven e-commerce boom would last, and amid wider online spending cuts, Shopify would move to cut a number of roles.

As of December, Shopify had over 10,000 employees. 31, 2021, according to securities announcement.

The cuts will affect all of Shopify’s divisions, although most of them will be in recruiting, support, and sales, and “across the company” are eliminating “overly specialized and overlapping roles, as well as some groups that were convenient to have, but too far away.” removed from building products,” Lutke said in the memo.

Technology companies announced their dismissalfreezing hiring and withdrawing job offers in the midst of economic uncertainty and COVID-19 pandemic trends are fading away. Earlier this month, parent company Google Alphabet and Facebook owner Meta both said they would slow the pace of hiring. Companies including Netflix as well as Coinbase announced layoffs.

The Canadian company, which makes tools for companies to sell products online, has been one of the biggest beneficiaries of the pandemic-driven e-commerce boom. With stores reopening and consumers returning to pre-pandemic shopping habits, Shopify and other companies in the e-commerce sector have begun to grapple with fears that they won’t be able to sustain the explosive growth they’ve enjoyed.

Shopify is betting that the growing mix of online spending versus in-store commerce will “constantly move forward by 5 or even 10 years,” Lutke said. The company said it has staffed to match an expected robust transition to e-commerce, more than doubling its workforce since the end of 2019. in February.

“It is now clear that the bet did not pay off,” Lutke said. “What we are seeing now is that the mixture is returning to about the level that, according to pre-COVID data, it should have been at the moment. Still growing steadily, but it hasn’t been a significant 5-year leap forward.”

In their latest Shopify earnings report forecast that revenue growth will be lower in the first half of the year as it is in line with tough pandemic-era comparisons. The company is due to report its second-quarter earnings on Wednesday.

Shopify said laid-off employees will receive 16 weeks of severance pay plus one week for each year they work at the company.