Fresh off Q4 profit, Shopify to focus on fulfilment, international market to sustain pandemic surge

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Companies that shifted their retail efforts online during the pandemic made their first sales with Shopify Inc. software every 28 seconds, the company said as it reported its fourth-quarter revenue nearly doubled compared with a year earlier.

The Ottawa-based e-commerce company was seeing new clients make their first sale roughly every minute before the health crisis, which fuelled a US$123.9 million profit in its latest quarter, up from US$771,000 a year earlier.

“Consumers are voting with their wallets,” said Harley Finkelstein, Shopify’s president, on a Wednesday call with analysts.

His company has managed to benefit from the pandemic’s temporary lockdowns that have forced entrepreneurs to seek online sales options like Shopify’s in order to survive.

But if lockdowns are soon lifted, it could become harder for Shopify to rack up new merchants and ensure pandemic gains aren’t erased when consumers have the ability to head back to brick-and-mortar stores.

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The company’s executives revealed Wednesday that they’ll try to keep shoppers and merchants hooked by pouring money into strengthening Shopify’s delivery fulfilment network and targeting international brands that would benefit from e-commerce.

The fulfilment network, which has been positioned as a competitor to Inc., has been in operation in the U.S. for almost two years, but has yet to expand further.

It’s currently focused largely on signing customers up and on a research and development warehouse it opened in Ottawa in 2020.

“We will use 2021 to continue improving product market fit to focus first on quality and merchant delight before we scale our fulfilment capabilities,” said chief financial officer Amy Shapero.

The company, she added, will focus on accelerating merchant onboarding and investing in automated technologies.

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It will also encourage more international entrepreneurs to join Shopify, but Finkelstein wouldn’t say what countries will be the target of those efforts.

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“We don’t necessarily want to single out any particular country, but there are places where you’ve seen us do quite well. We’ve been in Singapore and Japan for quite some time,” he said.

“We want to be the best product in market in those geographies, and so we’re not just going to simply go into those markets just for the sake of it.”

His remarks came as Shopify, which keeps its books in U.S. dollars, said its net profit in its latest quarter amounted to 99 cents per diluted share, up from a penny per diluted share a year earlier.

Revenue for that fourth quarter, which ended Dec. 3, totalled US$977.7 million, up from US$505.2 million in the last quarter of 2019.

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The increase came as subscription solutions revenue climbed to US$279.4 million compared with US$183.2 million a year earlier as more merchants joined the platform.

Merchant solutions revenue rose to US$698.3 million compared with US$322 million a year earlier, boosted by the growth of gross merchandise volume.

On an adjusted basis, Shopify said it earned US$198.8 million or US$1.58 per diluted share in its most recent quarter, up from an adjusted profit of US$50.0 million or 43 cents per diluted share in the fourth quarter of 2019.

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Analysts on average had expected an adjusted profit of US$1.29 per share and US$914.6 million in revenue, according to financial data firm Refinitiv.

New merchants using Shopify’s software during the quarter include Yamaha, Hallmark and Nestle’s Purina brand, said Finkelstein.

Shopify shares fell by almost 7 per cent in morning trading to just over $1,734 on the S&P/TSX composite index.