Amazon revenues are slowing and costs are rising

Against the backdrop of a pandemic that appears to be declining and inflation at a four-decade high, Amazon on Thursday released its slowest quarterly growth in years and its first quarterly loss since 2015.

The company reported revenue of $ 116.4 billion in the first three months of the year, up 7 percent from a year earlier. This is down from a 44 percent increase in the first quarter of 2021. The number of products that Amazon sold in the quarter was unchanged from a year earlier, and the cost of selling those products also increased.

Amazon lost $ 3.8 billion in the quarter, including a $ 7.6 billion drop in the value of its investments in Rivian Automotive, the maker of electric trucks whose shares fell this year. The loss was also caused by Amazon’s consumer businesses in North America and internationally, though its cloud services division continued to grow and make money.

The results fell far short of Wall Street expectations, causing Amazon shares to fall more than 10 percent in after-hours trading.

“Our teams are uniquely focused on improving productivity and cost-effectiveness in our performance network,” Andy Jassi, the company’s chief executive, said in a statement. “We know how to do it and we have done it before. It may take some time, especially when we are working on pressure on the current inflation and supply chain. “

The company forecasts sales growth of 3 per cent to 7 per cent in the current quarter, indicating that its growth could continue to slow. Amazon said Prime Day, its annual trading event held in June last year, would move into the third quarter of this year, further reducing sales growth in the current quarter.

Amazon took advantage of the corovirus pandemic when people flocked to online shopping. But since vaccines became widespread and inflation reached 8.5 percent in March, behaviors have changed again. Consumer spending on non-durable products that people often buy on Amazon fell 0.6 percent in the first quarter from the last three months of 2021, according to inflation, according to the Commerce Department on Thursday.

Chief Financial Officer Brian Olsawski told reporters that the company was “very pleased” with how often consumers bought on Amazon and that some slowdowns reflected the end of pandemic shopping habits. Consumers made more frequent, low-cost purchases such as masks a year ago and now they are returning to regular purchases, he said.

Amazon also faced rising costs, with operating costs for its consumer business in North America rising 16 percent, while sales in the region rose only 8 percent in the quarter. Inflation costs have added up to $ 2 billion, Mr Olsawski said, adding that “we expect them to be around for a while.”

He said another $ 4 billion in costs were caused by inefficient work. Amazon has spent a lot over the last two years hiring and doubling warehousing infrastructure, including opening delivery warehouses across the country, allowing its network of contractors to quickly deliver packages to people’s doors.

Mr Olsawski said the company was backing down on some expansion plans to increase existing spaces more effectively.

“We now have a lot of space compared to our demand templates,” he said. Without an unpredictable increase in demand for the virus, he said, “we can tighten our capabilities.”

In mid-March, Amazon forced several warehouse workers to take unpaid leave because consumer demand was weak.

In response to rising costs, Amazon has increased prices for consumers and sellers in its market. The price of its Prime membership program increased to $ 139 in February, from $ 119, the first increase since 2018. This month, the company announced additional “fuel and inflation” commission sellers whose inventory it stores and delivers to customers.

The labor deficit has also cost Amazon billions of dollars in recent times as it has responded by raising wages and offering other incentives. The company barely increased its workforce in the quarter, totaling 1.62 million employees.

The company has seen an increase in labor activism. In April, warehouse workers on Staten Island voted to be the first Amazon facility in North America to unite.

Amazon also had bright spots in its business. Amazon Web Services, its cloud computing business, grew 37 percent in the quarter, to $ 18.4 billion in sales.

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