OTTAWA — The COVID-19 pandemic has pushed Shopify Inc.’s share price up on anticipated increased demand for online sales, while also pushing the company to reorient priorities and standards.
The company says it has quickly reoriented to offer newer options like curbside pickup, while also suspending its brand campaign and shift its marketing team towards producing online tutorials such as how merchants could start selling gift cards and where they can access government assistance programs.
“I have intentionally asked the company very early in this crisis to delete all of our existing plans and re-derive them from this new reality,” said CEO Tobi Lutke on a conference call Wednesday.
The company has also offered free 90-day trials for new accounts, helping to boost new store creation by 62 per cent between March 13 and April 24 compared with the six weeks prior, while revenue overall jumped by 47 per cent in the first quarter compared with last year as both subscriptions and sales activity.
To meet the heightened demand, the company has had to lower its standards to make sure orders keep moving, said Lutke.
“I’ve asked the company to lower its minimum accepted quality bar to shipping because something has to become variable because there’s only 24 hours in the day.”
The company said it also rushed out its Shop app, which both allows order tracking and local store discovery, as part of the push for more services during such a demanding time.
Revenue growth and anticipated demand for its services has propelled the company’s valuation to lofty new heights. Its share price has climbed from under $500 in mid-March to over a thousand dollars Wednesday afternoon to put its valuation at $120 billion.
Still, the company reported a net loss in the first quarter of US$31.4 million in part because of expenses related to a takeover of 6 River Systems, significantly more brand spending, and more allowance for losses from its lending arm, which has lent out over US$1 billion, as it anticipates the impacts of COVID-19.
On an adjusted basis, Shopify says it earned US$22.3 million or 19 cents per share for the first quarter of 2020 compared with an adjusted profit of US$7.1 million or six cents per share for the first quarter of 2019.
Analysts on average had expected an adjusted loss of 18 cents per share for the quarter and US$442.9 million in revenue, according to financial markets data firm Refinitiv.
This report by The Canadian Press was first published May 6, 2020.
Companies in this story: (TSX:SHOP)
The Canadian Press