What happened
Shares of Shopify (SHOP 2.60%) sank 6.3% on Friday after FedEx (FDX 2.23%) issued a dire warning about the global economy.
So what
It's been a brutal year for Shopify's shareholders. The e-commerce platform's stock price is down 77% so far in 2022. Slowing e-commerce sales growth and the company's mounting losses have weighed heavily on its shares.
NASDAQ: SHOP
Key Data Points
Now it appears that the economy could continue to decelerate in the coming months. FedEx (FDX 2.23%) CEO Raj Subramaniam warned of a potential "worldwide recession" during an interview on CNBC after the logistics giant reported that its operating profits fell 15% year over year in its fiscal 2023 first quarter, which ended Aug. 31.
In the preliminary fiscal Q1 report it delivered Thursday, FedEx said its international shipping volumes were being negatively impacted by "macroeconomic weakness in Asia and service challenges in Europe." Analysts have feared that coronavirus-related lockdowns in China and war-driven disruptions to Europe's energy markets would lead to a sharp downturn in the global economy. FedEx's warning suggests these dire economic scenarios could be unfolding.
More concerning is that FedEx said business conditions could "further weaken" in weeks and months ahead. "Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.," Subramaniam said.
Now what
Much of Shopify's revenue is tied to the health of its merchant customers' businesses. E-commerce sales have already slowed down since governments in most countries have eased COVID restrictions and people have generally resumed shopping at traditional retail stores. Inflation, which has driven many people to cut back on their discretionary purchases, has also dented online retail sales.
If FedEx's forecast proves true and deteriorating economic conditions further weaken consumers' buying power, more pain could lie ahead for Shopify's merchants -- and its shareholders.
