"We couldn't know for sure at the time, but we did know that if the prediction came true, we would have to rapidly scale the company to meet that future," he said, on a call with analysts.
"Fast forward to now, as things have turned out differently."
Shopify has found the rate of spend its merchants see online is higher than in 2018, before COVID-19 struck the globe, but is lower than what the company planned for and resulted in a
"In short, we overshot our prediction," Finkelstein said.
"Recalibrating our investments and spending, we are making sure we do not sacrifice the components we feel are critical for Shopify."
His remarks come a day after Shopify laid off 10 per cent of staff – roughly 1,000 employees based on the company’s 2021 head count of 10,000.
The layoff, which CEO and founder Tobi Lütke took responsibility for, was blamed on Shopify's miscalculation and heavily weighed on its already depressed share price, which dropped 14 per cent by Tuesday's market close.
Amid a broad market sell-off that has most affected the tech sector, the price of Shopify’s stock has fallen by more than 78 per cent since its late 2021 peak of
It closed at
But Shopify is confident it can turn things around, despite its chief financial officer warning on the same call as Finkelstein that inflation is at a near 40-year high and shifting shopping habits.
Consumers are now favouring discount retailers and reducing their spending on many categories, a trend expected to persist throughout 2022,
"Our teams are mindful of the macro environment and have been rigorously evaluating and adjusting our spending priorities," she said.
That process began with a workforce review that slowed hiring between Shopify's first and second quarter, while also identifying areas where Shopify could "improve our operations and team" and thus carry out layoffs.
The company will continue slowing hiring in 2022 and end the year with a "modest" head count, Shapero said.
It's hard to say what the natural size of the company's workforce should be, but Shopify is not interested in linear head count growth, Lütke added.
He conceded the layoff had taught him about why many company leaders are careful around making big bets like Shopify has hinged its business on.
"Mathematically, they make a lot of sense," he said. "Obviously, you ought to take a 20 per cent chance at a 10 x increase, but when they don't work, they have to be a somewhat public thing."
Lütke's concessions came as Shopify revealed it lost
The company said the loss for the period ended
Shopify, which reports in
Revenue increased 16 per cent to
The company shared that its third-quarter adjusted operating loss, excluding severance costs, will likely increase over the second quarter and that in its fourth quarter it will experience a loss.
"Shopify was too aggressive growing operating expenses, coming out of COVID-19 and adjusting to the realities of a post COVID-19 e-commerce environment is proving to be noisy and disruptive," said
This report by
Companies in this story: (TSX:SHOP)
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