Shopify merchants not weighed down much by trade war, company says

As retailers head into their busiest shopping season, they and their customers don't appear to be feeling too bogged down by U.S. tariffs that have coloured much of the year. That's according to executives at Ottawa-based Shopify, one of the world's most prominent makers of e-commerce software. "When we look at the trade routes, when we look at the percentage of inbound versus outbound in the U.S., when we look at what we're seeing on de minimis, we've not seen any significant impacts on our merchants," chief financial officer Jeff Hoffmeister said on a Tuesday call with analysts. Economists have been closely watching the retail industry since Donald Trump kicked off his U.S. presidency by putting Canada and several other nations in his crosshairs at the start of the year. While he hasn't made good on all of his threats, products like steel, aluminum, lumber and some auto parts crossing the Canada-U.S. border have all been slapped with higher duties. The de minimis exemption, a longtime U.S. trade rule that has allowed goods valued under US$800 to skip the duties, has also ended. Some feared the moves would result in a massive upheaval for businesses, but Hoffmeister said so far, Shopify's merchants are "adapting quickly." While many responded to April tariff announcements by raising prices, it's been a less popular strategy lately. "The level of pricing increases is, in fact, slightly lower than the trends we were seeing last quarter," Hoffmeister said. His remarks came as Shopify reported a blockbuster third quarter with a profit of US$264 million and 32 per cent jump in revenue, when the results are compared with a year ago. The company, which keeps its books in U.S. dollars, said its profit amounted to 20 cents US per diluted share for the period ended Sept. 30 compared with a profit of US$828 million or 64 cents US a year ago. On an adjusted basis, Shopify said it earned 34 cents US per share in its latest quarter compared with an adjusted profit of 36 cents US per share a year ago. Revenue for the quarter totalled US$2.84 billion, up from US$2.16 billion in the same quarter last year. Shopify president Harley Finkelstein, who joined Hoffmeister on the analyst call, saw the result as a sign that Shopify "can balance both growth and profitability." "While we're continuously evolving, the story of our results remains incredibly consistent," he said. Some of Shopify's growth can be attributed to artificial intelligence. It's been increasingly embedding the technology in its software to ease some of the burdens merchants face and is pushing staff to use it to make them more effective. With AI now becoming so "reflexive" and its automation driving so many productivity gains, Hoffmeister said the company has been able to "redeploy talent to the highest-impact work." Thus, Shopify's head count has consistently been flat to down, both sequentially and year-over-year, and its operating expenses have dropped from 45 per cent in 2023 to 37 per cent this year. Another driver of Shopify's growth has been its ability to cater to so many industries. While Hoffmeister listed apparel, accessories, health, food and beverage, beauty, home, and garden as strong performers in Shopify's third quarter, it is also seeing rapid growth in other areas, where it's won business away from larger enterprise platforms. For example, Shopify's pet supplies vertical grew by more than 50 per cent, and arts and entertainment were up 45 per cent. "All roads lead to Shopify," Finkelstein said. "Whether it's food or manufacturing or education or even automotive, these are verticals traditionally we didn't go after and now, we're winning them." The success has showed up in numbers like Shopify's merchant solutions revenue. It amounted to US$2.15 billion, up from US$1.55 billion a year ago, while subscription solutions revenue totalled US$699 million, up from US$610 million in the same quarter last year. Looking forward to the upcoming holiday season, Shopify said it expects its fourth-quarter revenue to grow at a percentage rate in the mid-to-high twenties on a year-over-year basis. The numbers will reflect a shift Finkelstein has seen in Black Friday and Cyber Monday. "It used to be a few peak sales days, but now it stretches across the whole quarter and it's more global than ever," he said.