Shopify Inc (NYSE: SHOP) stock slid more than 15% on Tuesday after the eCommerce company said it’s cutting its headcount by roughly 1,000 workers.
Why is Shopify cutting jobs?
That would mean about 10% of its global workforce will go out of job. The layoff will help Shopify reduce expenses amidst a slowdown in eCommerce related to inflation that’s making consumers spend less on discretionary spending.
Online shopping was the name of the game over the past two years as COVID restricted people to their homes. Naturally, therefore, eCommerce is decelerating now that the restrictions have been eased.
For the year, “SHOP” is now down more than 75%. Wall Street, though, has a consensus rating of “overweight” on the stock.
Earlier this month, Netflix and Coinbase had also announced layoffs. Giants like Alphabet and Meta have also disclosed plans lowering the pace of hiring.
What roles are likely to be affected?
In a blog post, CEO Tobi Lutke agreed he had wrongly expected the pandemic-driven boost to last longer. Disclosing the roles that will likely be affected, he wrote:
Most of the impacted roles are in recruiting, support, and sales, and across the company we’re also eliminating over-specialised and duplicate roles, as well as some groups that were convenient to have but too far removed from building products.
Laid off employees will get sixteen weeks of severance pay and an additional week for every year they worked at Shopify.
The stock market news comes a day before Shopify is to report its fiscal Q2 results. Consensus is for it to earn 3 cents a share (down 86% YoY) on $1.33 billion in revenue (up 19% YoY).
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