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Shopify Says It Will Lay Off 10% of Workers, Sending Shares Lower

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Shopify Inc.

SHOP -14.06%

is cutting roughly 1,000 workers, or 10% of its global workforce, rolling back a bet on e-commerce growth the technology company made during the pandemic, according to an internal memo.

Tobi Lütke,

the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year.

Shopify’s shares fell 14% to $31.55 on Tuesday after The Wall Street Journal first reported on the layoffs. The shares have fallen more than 80% since they peaked in November near $175 adjusting for a recent stock split. The company reports quarterly results on Wednesday.

Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. “It’s now clear that bet didn’t pay off,” said Mr. Lütke in the letter, which was reviewed by the Journal. “Ultimately, placing this bet was my call to make and I got this wrong.”

The Ottawa-based company will cut jobs in all its divisions, though most of the layoffs will occur in recruiting, support and sales units, said Mr. Lütke. “We’re also eliminating overspecialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products,” he wrote. Staff who are being let go will be notified on Tuesday.

Shopify’s job cuts are among the largest so far in a wave of layoffs and hiring freezes that is washing over technology companies. Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.

Shopify’s job cuts are the first big layoffs the company has announced since Tobi Lütke founded it in 2006.



Photo:

Cate Dingley/Bloomberg News

Netflix Inc.

cut about 300 workers in June as it deals with a loss in subscribers.

Twitter Inc.,

now mired in a legal standoff with

Elon Musk,

laid off fewer than 100 members of its talent acquisition team. Mr. Musk’s own company, electric-vehicle maker

Tesla Inc.,

late in June laid off roughly 200 people, after announcing it would cut 10% of salaried staff.

Other firms, including

Microsoft Corp.

and

Alphabet Inc.’s

Google, said they would slow hiring the rest of the year.

Tuesday’s announcement is Mr. Lütke’s first big move after Shopify’s shareholders approved a board plan to protect his voting power. The job cuts are the first big layoffs the company has announced since Mr. Lütke started the company in 2006.

Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.

Shopify reported annual revenue growth of 86% in 2020 and 57% in 2021 to about $4.6 billion. However, the company reported a softening this year, and warned that 2022’s numbers wouldn’t benefit from the pandemic trends.

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In his memo on Tuesday, Mr. Lütke said, “What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.

In May, Shopify agreed to buy U.S. fulfillment specialist Deliverr Inc. for $2.1 billion in cash and stock. It announced partnerships with Twitter in June and with YouTube earlier this month, allowing users to buy items that Shopify merchants post on those platforms.

Shopify is offering 16 weeks of severance to the laid-off workers, plus one week for every year of service.

Write to Vipal Monga at vipal.monga@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Stock Futures Rise After Nasdaq Enters Correction

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U.S. stock futures gained, putting indexes on course to pare some of the sharp losses that have come as investors reposition their portfolios, spooked by the prospect of tightening monetary policy and slowing growth.

Nasdaq-100 futures rose 0.9% Thursday, a day after a late tech selloff dragged down indexes. Futures tied to the S&P 500 rose 0.5% and blue-chip Dow Jones Industrial Average futures added 0.4%. 

In premarket trading, Travelers Companies rose over 4% after reporting record net income in the fourth quarter.

American Airlines

Group gained 1.6% after saying it had trimmed its losses.

Netflix

will be one of the first tech giants to post its fourth-quarter results, after markets close, when

PPG Industries

will also report.

The technology-heavy Nasdaq Composite shed 1.1% on Wednesday.



Photo:

BRENDAN MCDERMID/REUTERS

Hong Kong-listed Chinese stocks jumped after an interest-rate cut by China’s central bank lifted shares of property developers and tech giants. The Hang Seng Index rose 3.4%, while mainland China’s Shanghai Composite Index edged down 0.1%. Elsewhere in Asia, the Nikkei 225 rose 1.1%. The pan-continental Stoxx Europe 600 edged up 0.1%. 

Faced with the prospect of multiple interest-rate rises, cooling growth and inflation at multidecade highs, investors have been reassessing the pandemic-era playbook that focused on outsize gains for growth stocks, such as tech. In recent sessions, investors have rotated into sectors expected to perform better in the coming year, such as financials and energy. 

“I don’t see a whole lot in the market that is really alarming me. There is no one out there saying ‘run for the hills,’ but there are those saying they are going to take off risk and reposition to other areas of the market,” said

Kara Murphy,

chief investment officer of Kestra Holdings.

That has prompted tumultuous trading. On Wednesday, the Nasdaq Composite closed more than 10% below its all-time closing high, putting it in correction territory.

Investors are selling government bonds in anticipation of higher interest rates, pushing up yields, and in the process, pressuring tech companies, whose future earnings become less attractive when compared with bonds with rising yields.

The yield on the 10-year U.S. Treasury note crept down to 1.823% Thursday from 1.826% Wednesday, after rising steadily in recent weeks. Benchmark German bund yields fell further into negative territory, a day after they briefly turned positive. The yield on the 10-year German government bond fell to minus 0.037% Thursday from minus 0.014% Wednesday.

U.S. home prices hit an all-time high in 2021, but those increases are expected to slow in 2022 thanks to a number of economic factors. Here’s what’s driving the housing market and what that could mean for prospective buyers and sellers. Photo: George Frey/Bloomberg News

Investors are awaiting data on the U.S. housing market, a bright spot for the economy. The data, due at 10 a.m. ET, is expected to show that existing home sales slowed in December, but were still on track for the best year since 2006. 

Brent crude, the international oil benchmark, fell 0.5% to $88.01 a barrel. This follows a rally partly driven by the potential for supply disruptions in Russia and the Middle East. On Wednesday, Brent crude futures hit their highest level since October 2014.

Write to Will Horner at william.horner@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Stock Market Today: Dow Rose as Moderna Slumped Again

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The


Dow Jones Industrial Average
had one of its best days this year on Monday, as value and defensive stocks led a rebound from last week’s market declines.

The news Monday was relatively positive, with signs that the Omicron variant of Covid-19 might be less severe than earlier strains and reports that China is considering easing monetary policy. On the Federal Reserve policy front, the latest reporting suggested that the central bank could announce plans at its next meeting to more quickly pull back from its bond-buying program.

The Dow surged 647 points, or 1.9%, for its best one-day point gain since November 2020 and the largest percentage increase since last March. The


S&P 500
closed up 1.2% and the Nasdaq Composite rose 0.9%, while the small-cap


Russell 2000
gained 2.1%, for its fourth-straight daily move of 2% or more.

Post-pandemic reopening stocks were among the biggest gainers on Monday. The


U.S. Global Jets
exchange-traded fund (ticker: JETS) added 5.3%, as


American Airlines Group

(AAL) added 7.9% and


United Airlines Holdings

(UAL) jumped 8.3%. Cruise lines


Carnival

(CCL) and


Royal Caribbean Cruises

(RCL) surged 8.0% and 8.3%, respectively.


Marriott International

(MAR) added 4.5%,


Live Nation Entertainment

(LYV) rose 6.1%, and


Cinemark Holdings

(CNK) gained 7.7%.

S&P 500 value stocks as a group gained 1.4% on Monday, versus a 0.9% rise for growth stocks in the index.

Investor attention remains focused on the newly discovered Omicron variant of coronavirus, news of which recently brought about the Dow’s worst day of the year and saw volatility rock markets last week. The latest headline driving sentiment comes from South Africa, where data—though from a small sample size—suggest that symptoms caused by Omicron were milder than with other variants.

Investors aren’t out of the woods yet, however. The broad market will remain sensitive to daily headlines about Omicron—both good and bad.

“It still feels like we’re in the guesswork stage of working out what the impact of Omicron will be,” said Russ Mould, an analyst at broker AJ Bell. “It would be naive to rule out further volatility as markets attempt to work out exactly what’s going on.”

On Monday, the news was positive and investors bought the market. All 11 S&P 500 sectors closed in the green.

Fed policy has been pushing investor sentiment the other way. Chair Jerome Powell indicated last week that the central bank would consider speeding up its slowing, or tapering, of monthly asset purchases, which add liquidity to markets, amid higher inflation.

“We’re really at a fascinating crossroads in markets at the moment,” said Jim Reid, a strategist at Deutsche Bank. “The market sentiment on the virus and the policy makers at the Fed are moving in opposite directions.”

Those trends mean different things for different kinds of stocks and indexes.

If Omicron is less severe than feared, then the economy might hold up better than expected. That would be good for economically-sensitive cyclical stocks, like many of those in the Dow. Higher bond yields and interest rates, however, can put downward pressure on stock valuations, particularly those with nosebleed price-to-earnings ratios, many of which are found in the Nasdaq.

“Like Friday, how the Nasdaq trades will likely determine the day, as markets want to see the tech sector stabilize after intense weakness late last week,” wrote the Sevens Report’s Tom Essaye. “If the Nasdaq can stabilize, the broad market can bounce.”

The tech-heavy index bounced from a loss of about 1% shortly after Monday’s opening bell.

In the commodity space, oil prices rose Monday after Saudi Arabia raised its January prices for Asian and U.S. customers over the weekend by $0.60, in a sign of firmer demand expectations.

Futures contracts for the international oil benchmark Brent rose 4.6%, to above $73 a barrel, with U.S. futures for West Texas Intermediate crude up 4.9% to about $69.50 a barrel.

“Given that OPEC+ is proceeding with its planned 400,000 barrels per day increase this month, it appears that Saudi Arabia is taking a punt that Omicron is a virus in a teacup,” said Jeffrey Halley, an analyst at broker Oanda. “Saudi Arabia’s confidence, along with the South African Omicron article over the weekend, is a boost to markets looking for good news in any corner they can find it.”

Cryptocurrency markets remained depressed after digital assets took a tumble over the weekend.


Bitcoin
and


Ether,
the two leading cryptos, remained off their lows following the stark fall Saturday, but were slipping after steadying Sunday. Bitcoin was trading hands around $49,000—down from more than $57,000 as recently as Friday—with Ether holding above $4,000.

Here are several stocks on the move Monday:


Nvidia

(ticker: NVDA) was among the most actively traded stocks in the U.S. Monday, closing down about 2.1%. Shares of fellow semiconductor firm Advanced Micro Devices (AMD) lost 3.4%.


Lucid Group

(LCID) stock dropped 5.1% after the electric-vehicle startup revealed that it had received a subpoena from the Securities and Exchange Commission, without offering many details.


Kohl’s

(KSS) gained 5.4% after an activist investor said it should explore selling itself.


Moderna

(MRNA) fell 13.5% after its president said that the risk that vaccines don’t work as well against Omicron is high. Pfizer (PFE) stock slid more than 5%.

Alibaba Group Holding (BABA) stock closed up 10.4% after a management shakeup at the e-commerce giant.


Deutsche Bank

(DB) rose 3.6% after JPMorgan upgraded the bank to Overweight from Neutral, adding that the group shows positive revenue developments in key divisions.

Pharma giant


Roche

(ROG.Switzerland) rose 1.5% in Zurich after announcing that it would release rapid antigen tests for Covid-19 and flu viruses next month.

Food delivery group


Just Eat Takeaway.com

(JET.U.K.) fell 4.9% in London following a price target cut and downgrade to Market Perform from Outperform by Bernstein, which sees few positive catalysts in the pipeline for the company.

Write to Jack Denton at jack.denton@dowjones.com

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Business

Stock Market Today: S&P 500, Nasdaq Dip After Apple and Amazon Woes

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Oil companies Chevron and Exxon Mobil will be in the earnings spotlight at the end of a busy week.


David McNew/Getty Images

The stock market retreated from earlier gains Friday after


Apple

and


Amazon.com

reported disappointing quarterly results. Plus, signs of caution about the economy weighed on stocks across the board.

In afternoon trading, the


Dow Jones Industrial Average
was flat, after the index climbed 239 points Thursday to close at 35,780. The


S&P 500
and the


Nasdaq Composite
were both down 0.1% Both the Nasdaq and the S&P 500 hit record highs at the close Thursday.

Despite the weak finish, October has been a strong month for stocks. The S&P 500 has gained 5.5% for the month of October, which saw the market rebound from an early autumn drawdown. In September, concerns about supply chain constraints and rising bond yields pushed stocks lower.

Several factors enabled stocks to rebound this month. Bond yields have paused in their larger ascent. Companies have mostly beat earnings estimates. And while risks still remain—yields aren’t necessarily finished rising and supply chain constraints aren’t easing much—retail investors bought the dip.

“They [retail investors] saw the 5% [market decline] and so when they see the opportunity to buy down 5% they step in and they do that,” said John Ham, wealth advisor at New England Investments & Retirement Group.  

Big Tech earnings put the issue of shortages on center stage on Friday.


Apple

(ticker: AAPL) stock fell 2.1% after the company reported a profit of $1.24 a share, in line with estimates, on sales of $83.4 billion, below expectations for $84.9 billion. The company said supply-chain constraints due to chip shortages were worse than expected. iPhone sales were $38.9 billion, below expectations for $41.5 billion. 


Amazon

(AMZN) stock dropped 2.9% after the company reported a profit of $6.12 a share, missing estimates of $8.92 a share, on sales of $110.8 billion, below expectations for $111.6 billion. The company said labor shortages, higher shipping costs, and other rising expenses are eating into profits. Management also guided for current quarter sales of $135 billion at the midpoint of its range, below analysts’ expectations for $142 billion. 

Even if Apple and Amazon stocks were having a better day, the stock market would still look fairly weak. Just over half of S&P 500 stocks were in the red, according to FactSet. 

This comes as the yield curve—the difference in yield between long-dated and short-term debt—declined. The 10-Year Treasury yield slipped to 1.56% from hitting 1.61% earlier. The 2-Year yield held at 0.5%, where it has mostly sat since Tuesday. Higher short-term rates indicate markets anticipate a Federal Reserve rate hike sooner rather than later, which could lower long-term economic demand and inflation. Some on Wall Street have recently flagged the falling yield curve as a potential risk to monitor.

In cryptocurrency markets, Ethereum—the leading crypto asset after Bitcoin—hit an all-time high above $4,400, according to data from CoinDesk.

Here are six stocks on the move Friday:


Chevron

(CVX) gained 0.9% after the company reported a profit of $2.96 a share, beating estimates of $2.21 a share, on sales of $44.7 billion, above expectations for $40.5 billion. 


Starbucks

(SBUX) stock dropped 7.4% after the company reported a profit of $1, beating estimates of 99 cents, on sales of $8.1 billion, below expectations for $8.2 billion. 


Newell Brands

(NWL) stock rose 5.1% after the company reported a profit of 54 cents a share, beating estimates of 50 cents a share, on sales of $2.79 billion, above expectations for $2.78 billion. 


Caterpillar

(CAT) stock rose 0.3% after getting upgraded to Buy from Neutral at UBS. 


Synchrony Financial

(SYF) stock rose 0.3% after getting upgraded to Buy from Neutral at Citigroup. 


U.S. Steel

(X) soared 12% following third-quarter earnings Thursday that smashed expectations and an announcement that the company would raise its dividend.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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