Shopify Inc. executives believe the shift toward online sales triggered by the COVID-19 pandemic is here to stay.
Chief executive Tobi Lutke and president Harley Finkelstein said Wednesday that early patterns emerging in lockdown-free countries like New Zealand and Australia show consumers have embraced e-commerce even after COVID-19 restrictions are lifted — and they expect North America to eventually see the same.
"Consumer preferences have shifted permanently," said Finkelstein, in a call with analysts.
"The centre of gravity was off-line. It is now online and there's no going back to the pre-pandemic version of that."
The shift has been a boon for the Ottawa e-commerce giant, which helps businesses run online stores but has long had to contend with online purchases compromising less than 10 per cent of retail sales for years.
The pandemic with its temporary store closures and explosion of online offerings pushed the proportion of e-commerce sales in Canada to new records. In April 2020, it hit a record 11.4 per cent.
Shopify was ready for the spike. It has spent much of the last five years building out a fulfilment network, signing a series of social media deals, engineering new ways for entrepreneurs to access capital and positioning itself as a rival to Amazon.com Inc.
At the onset of the pandemic, Shopify saw a rush of new businesses using its software and customers ready to shop online that has yet to dissipate, the company said as it released figures on its latest quarter.
Shopify, which keeps its books in U.S. dollars, said net income soared to US$1.26 billion in the quarter, up from the US$31.4-million net loss it reported for the same period last year.
Its net income for the period ended March 31 amounted to US$9.94 per diluted share, up from a loss of 27 cents per diluted share at the same time last year.
Shopify attributed the boost to a US$1.3-billion unrealized gain on its investment in "buy now, pay later" company Affirm, which had an initial public offering in January, and to the continued interest in online shopping.
Excluding one-time items, its adjusted profit was US$254.1 million or US$2.01 per diluted share, up from US$22.3 million or 19 cents per diluted share a year ago.
The company was expected to earn 73 cents per share in adjusted profits on US$865.5 million in revenues, according to financial data firm Refinitiv.
Shopify's gross merchandise volume — the total value of orders facilitated through its offerings — amounted to US$37.3 billion in its latest quarter, up from US$17.4 billion during the same period last year.
Its share price ended the day up 11.1 per cent or $159.02 to reach $1,589.49 on the Toronto Stock Exchange.
The company, however, is far from being able to sit back and relax.
Shopify's outlook is accounting for some consumer spending to rotate back to off-line retail and services, as widespread vaccination becomes more common in many countries in 2021 and people have more freedom to venture out of their homes.
Chief financial officer Amy Shapero warned it could weigh on revenue, which reached US$988.6 million, a 110 per cent increase from US$470 million at the same time last year.
"We continue to expect to grow revenue rapidly in 2021, but at a lower rate than in 2020," she said.
The company will also have to deal with significant changeover in its leadership ranks.
In mid-April, it announced chief talent officer Brittany Forsyth, chief technology officer Jean-Michel Lemieux and chief legal officer Joe Frasca were all leaving.
Throughout the pandemic, Shopify also saw the departures of chief product officer Craig Miller, director of product marketing Arati Sharma and Michael Perry, the director of Kit, an artificial intelligence businesses Shopify once acquired.
"When people leave companies, it's … hard for everyone to figure out how to react to that, but I do think that it's something that should be celebrated because clearly, incredible things have been done together," said Lutke, who took over Miller's duties in September.
He vowed Wednesday that he's not going anywhere soon and told analysts he's "all in" because "I'll never come up with a better idea."
"Leaving at the right time is something world-class executives do," he said. "For me, it would be way too early."
This report by The Canadian Press was first published April 28, 2021.
Companies in this story: (TSX:SHOP)
Tara Deschamps, The Canadian Press