Amazon Reports Strong 4Q Results Despite Supply Chain Snags

Amazon's profits in the fourth quarter nearly doubled, beating analysts' expectations, even as the online behemoth continues to contend with surging costs tied to a snarled supply chain and labour shortages.

The company, based in Seattle, also raised its annual prime membership fee on Thursday to US$139 per year from US$119. This is the first time Amazon has raised the price of Prime membership since 2018.

Amazon Canada representative Andrew Gouveia said the price increase announced for Prime only applies to U.S. customers.

Shares of Amazon spiked nearly 17 per cent in after-market trading.

“As expected over the holidays, we saw higher costs driven by labour supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron," said Amazon CEO Andrew Jassy, who succeeded founder Jeff Bezos in that role last July. Bezos is now executive chairman.

“Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

Amazon was one of the few retailers that has prospered during the COVID-19 outbreak. As physical stores selling non-essential goods temporarily or permanently closed, homebound people turned to Amazon for everything from groceries to cleaning supplies.

But growth has slowed as newly vaccinated Americans feel comfortable going out. And the company, like many others, are dealing with global supply chain issues and shortages of workers.

Amazon's chief financial officer Brian Olsavsky estimated Amazon incurred about US$4 billion in costs related to supply chain issues and labour issues. And he said that the surging Omicron variant resulted in workers calling in sick, hurting productivity.

Still, the company reported a profit of US$14.32 billion, or US$27.75 per share, for the three-month period ended Dec. 31. That compared with a profit of US$7.22 billion, or US$14.09 per share, during the year-ago period. Revenue rose nine per cent to US$137.41 billion, the company’s fifth consecutive quarter of revenue topping US$100 billion.

Analysts surveyed by FactSet on average expected US$137.68 billion in quarterly revenue and per-share earnings of US$3.61 per share.

The company said that sales are expected to be between US$112 billion and US$117 billion for the current fiscal quarter. Analysts were expecting US$120.93 billion, according to FactSet estimates.

Meanwhile, sales at Amazon’s cloud-computing business, which helps power the online operations of Netflix, McDonald’s and other companies, grew 40 per cent in the quarter.

Amazon faces attempts by workers to unionize. Workers at a company warehouse in Bessemer, Ala., organized by the Retail Wholesale and Department Store union, will begin voting Friday in a do-over election on whether to unionize the facility. The election comes two months after the federal labour board declared Amazon unfairly influenced the election last year.

The company has also been fighting a separate attempt by workers in a New York City facility, where last week the nascent Amazon LaborUnion lined up enough support to vote on whether to unionize.

February 04, 2022