Shopify Inc. reported an unexpected loss in the third quarter ended Sept. 30 as the Canadian ecommerce platform provider increased spending to expand its customer network and build fulfillment centers across the U.S.
Shopify said in June that it planned to spend $1 billion to set up a network of fulfillment centers in the U.S. to help merchants using its platform deliver products more quickly and cheaply, much the way Amazon.com Inc. does. The Ottawa-based company, which processes millions of individual sales by hundreds of thousands of merchants every year, could potentially pool shipments from different online stores together, making shipping cheaper and more efficient. Storing products from different merchants in centralized warehouses would also decrease costs for sellers and buyers alike, and net Shopify another revenue stream.
That could help the company mount a defense against Amazon, No. 1 in the Internet Retailer 2019 Top 1000, which lowers prices and encourages merchants to use its own warehouses and shipping tools. The improvements have also helped attract new users to the platform and Shopify said it now has more than 1 million merchants around the world.
“Our strong results in the quarter were driven in part by the success of our international expansion, which is just one of the many ways we are investing in the platform,” said chief financial officer Amy Shapero.
Shopify doubled its losses to $78.8 million for the third quarter ended Sept. 30 from $23.8 million the previous year. Revenue in the three months ending Sept. 30 grew 44.6% to $390.6 million from $270.1 million. For the year so far, revenue rose 38.5% to $459.1 million from $331.4 million, while losses grew 99.4% to $125.6 million from $63.0 million.
Even as the company reports high growth rates in sales, the 44.6% increase in the third quarter was the slowest growth rate in Shopify’s four years as a public company. To combat that slowdown, it announced the purchase of warehouse robotics maker 6 River Systems Inc. last month to ramp up its plan to set up a network of fulfillment centers in the U.S.
Shopify is the ecommerce platform provider for 37 retailers in the Top 1000, according to the 2020 Leading Vendors to the Top 1000 E-Retailers report coming out this month.
In other earnings news:
- Consumer electronics behemoth Apple Inc. (No. 2) may use its new credit card, the Apple Card, to keep iPhone sales strong as consumers wait longer to upgrade devices. During a conference call with analysts on Wednesday, Apple CEO Tim Cook and chief financial officer Luca Maestri described a potential solution to this upgrade problem: A new feature for the Apple Card will let consumers pay for their iPhones over 24 months with no interest and manage the payoff program from their iPhone. The program’s details aren’t clear, but Cook said making it simple to finance new devices gives consumers more confidence in upgrading. Apple doesn’t break out ecommerce sales, but total sales increased 1.8% for the fourth fiscal quarter ended Sept. 28 to $64.04 billion from $62.90 billion. For the fiscal year ended Sept. 28, sales fell 2.0% to $260.17 billion from $265.60 billion.
- Online home goods retailer Wayfair Inc. (No. 12) increased revenue 35.1% for the third quarter ended Sept. 30 to $2.31 billion from $1.71 billion a year before. However, losses grew 79.3% to $272.0 million from $151.7 million as tariffs took a toll, leading to higher retail prices and lower repeat customer orders. Wayfair compensated with higher ad spending to keep new shoppers coming in, leading to overall revenue growth. Year to date, Wayfair’s revenue is up 38.2% to $6.59 billion from $4.77 billion, while its losses grew 81.7% to $654.4 million from $360.2 million.
- Meal-kit seller Blue Apron Inc. (No. 98) increased its average order value 1.4% and the number of orders per customer 9.8% for the third quarter ended Sept. 30. However, overall revenue shrank 33.9% to $99.5 million from $150.6 million during the same period last year and the customer base contracted 34.8%. The decrease in sales comes as Blue Apron cuts back on marketing. It’s losses decreased 22.7% this quarter to $26.2 million from $33.9 million in the same quarter last year. Revenue for the year so far fell 31.6% to $360.5 million from $526.9 million and losses fell 60.2% to $39.2 million from $98.4 million.
- Online marketplace for handcrafted goods Etsy Inc. grew gross merchandise sales, or the total value of goods sold on its marketplaces, grew 30.1% to $1.20 billion in the third quarter ended Sept. 30 from $922.5 million in Q3 2018. For the first nine months of the year, gross merchandise sales grew 23.9% to $3.32 billion from $2.68 billion in the same period a year ago. Etsy is No. 16 in the ranking of Internet Retailer Online Marketplaces. 2019 figures include gross merchandise sales from Reverb Inc. (No. 35), an online marketplace for music gear, which Etsy acquired in August. Not including Reverb’s $76.9 million in sales, Etsy grew 21.7% to $1.12 billion in gross sales in Q3 year over year and 20.7% to $3.24 billion in the first three quarters of the year. Revenue, which Etsy receives from the commissions and seller services fees it charges its sellers, grew 31.6% to $197.9 million in Q3 2019 and 35.9% to $548.4 million in the first three quarters of 2019.
- Facebook Inc. delivered steady user growth and a 28.6% sales increase to $17.65 billion from $13.73 billion for the third quarter ended Sept. 30. Facebook’s sales are mostly from its ads, as well as payments and “other fees.” The social media giant’s monthly global user base grew by 35 million, including 3 million new users in the lucrative North American market, which appeared to reach a plateau in recent years. Facebook added as many new users in the U.S. and Canada last quarter as it did the previous five quarters combined. On an earnings call with analysts, Facebook executives pointed to ads in Stories, where posts disappear after 24 hours, as a key revenue growth area. Facebook also mentioned growth of ads in the Explore section of its Instagram photo-sharing app, where users go to discover posts from people they don’t follow.
- Photo-centric social network Pinterest Inc. grew revenue for the third quarter ended Sept. 30 by 47.1% to $279.7 million from $190.2 million. The social network added 22 million users during the quarter, with 322 million users overall at the end of the quarter. The company said in its earnings release the user gains were driven by “double-digit growth in nearly all international countries.” Although, Pinterest’s overseas users generate less revenue than those in the U.S.—on average, domestic users brought in $2.93 each in the recent period, while each international user accounted for just 13 cents. Just 2 million of Pinterest’s 22 million new users in the quarter were in the U.S.