Shares fell 5% in after-hours trade.
Last year, many consumers were at home due to the COVID-19
pandemic, making for a tough comparison this quarter, said Chief Financial
Officer Brian Olsavsky on a call with reporters. In addition, customers are
going out more and doing less online shopping.
The company is working to get employees vaccinated but did
not announce any mandates. Amazon has not made any assumptions about rising
COVID cases globally from the more contagious Delta variant but hopes the virus
is eliminated and the economy continues to come back.
The top job Jassy inherited on July 5 has never been bigger
and more complex. Last quarter Amazon announced a deal to buy the film studio
MGM for $8.5 billion, expanding in Hollywood at the same time as it is running
a grocery chain, building a healthcare business and facing scrutiny from
regulators worldwide.
During the COVID-19 pandemic, shoppers turned to Amazon
while brick-and-mortar stores closed. Amazon posted record profits, drew more
than 200 million Prime loyalty subscribers, and recruited over 500,000 workers
to keep up with surging demand.
Now, the company's breakneck growth is starting to subside.
Revenue climbed 27% to $113 billion for the second quarter ended June 30, shy
of analysts' average estimate of $115 billion, according to IBES data from
Refinitiv. For the third quarter, Amazon expects sales will grow at most 16%.
The world's biggest online retailer had moved its annual
marketing blitz, Prime Day, to June this year, hoping to peddle more goods
before shoppers left town on summer vacations. While it said the event was the
biggest two-day sales period ever for merchants on its platform, analysts have
witnessed signs of slowing demand.
North America, Amazon's largest market, saw sales increase
only 22% in the second quarter, versus 43% in the same period a year earlier.
Amazon Web Services was a bright spot, however. The cloud
computing division that Jassy formerly ran grew revenue 37% to $14.8 billion,
ahead of estimates of more than $14.1 billion. Among the deals it inked in the
just-ended quarter was an agreement with Canada's BMO Financial Group.
Profit rose 48% to $7.8 billion, the second-largest
quarterly result Amazon ever announced.
Still, enormous challenges come with Amazon's size.
Costs continue to rise, not just from the $200 million in
extra stock Amazon plans to pay Jassy over the next 10 years. The company has
offered an average $17 in hourly wages - more than double the U.S. minimum -
plus signing bonuses to attract 75,000 workers during a labor shortage.
It has said it planned to hike pay for over half a million
employees, costing more than $1 billion, and like other companies, it is facing
clogged ports and other disruptions to the transportation supply chain.
The No.2 U.S. employer grappled with workplace tumult as
well. Its warehouse in Bessemer, Alabama, this winter became a rallying point
for organized labor, which wanted to form Amazon's first U.S. union and inspire
similar efforts across the country. Amazon is awaiting a decision on whether a
U.S. National Labor Board director will overturn its landslide victory and call
for another union election.
Following the April vote count, Bezos said he aimed to make
Amazon a better place to work. It is unclear how he will govern from the
sidelines in the role of executive chair of Amazon's board.
Amazon said it expects operating income for the current
quarter to be between $2.5 billion and $6.0 billion, which assumes $1 billion
in costs related to COVID-19. -Reuters
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