The ocean of red ink in Amazon's report came mostly from the
company's accounting for a $7.6 billion loss in value of its stock investment
in Rivian Automotive. Rivian went public in late 2021 and its stock traded at
close $180 at one point. It closed Thursday at $32.18. Ford Motor Co reported a
similar write-down of the value of its Rivian investment Wednesday.
Amazon's e-commerce business also reported an operating loss
of $1.57 billion in North America and $1.28 billion internationally.
Meanwhile, sales at Amazon's cloud-computing business, which
helps power the online operations of Netflix, McDonald's and other companies,
grew 37% in the quarter. And sales in its advertising business, where brands
pay to get their products to show up first when shoppers search on Amazon's
site, rose 25%.
Still, the slowdown in online spending is real and
broad-based. While in-store sales rose, March is the first month to show
decline in online sales since the pandemic began, according to Mastercard
SpendingPulse, which tracks spending made over the Mastercard payments network
and survey estimates for other payments made with cash and checks.
Amazon prospered during the Covid-19 pandemic as homebound
people eager to limit human contact turned online to purchase what they need.
But growth has slowed as vaccinated Americans feel more comfortable going out.
According to the e-commerce research firm MarketPlace Pulse, the value of goods
sold on Amazon last year grew by half the rate compared to 2020.
Like many others, Amazon is dealing with pressure from
inflation and supply-chain issues. In the past two years, Amazon's Chief
Financial Officer Brian Olsavsky said the company has doubled the size of its
operations and nearly doubled its workforce.
He said labour shortages and a lack of physical space are no
longer major issues, but the company continues to face a variety of pressures
such as increased shipping costs.
Inflation-related expenses added roughly $2 billion of
incremental costs when compared to last year, Olsavsky said, adding that the
company also incurred another $4 billion in costs related to productivity loss
and other inefficiencies.
"The pandemic and subsequent war in Ukraine have
brought unusual growth and challenges," said Amazon CEO Andy Jassy in a
statement. "Our teams are squarely focused on improving productivity and
cost efficiencies throughout our fulfillment network. We know how to do this
and have done it before."
To offset rising fuel costs and inflation, the retail giant
has added a 5% surcharge to fees it charges third-party sellers who use its
fulfillment services. Last quarter, Amazon also hiked its annual Prime
membership fee by $20, a first since 2018. Despite the fee hike, Olsavsky said
millions of new Prime members have enrolled during the quarter.
Revenue rose 7% to $116.44 billion, compared with $108.52
billion in first quarter 2021, representing the company's sixth consecutive
quarter of revenue topping $100 billion. Amazon had projected sales between
$112 billion and $117 billion. Analysts surveyed by FactSet were expecting
$116.5 billion.
"Given the pace at which the business grew over the
past few years this shift is hardly surprising," said Neil Saunders,
managing director of GlobalData Retail.
"It represents more of a post pandemic reset than
catastrophic failure. Nevertheless, the slowdown raises important questions
over how Amazon can restore momentum and regain its leadership position as one
of the primary drivers of online growth."
Amazon said it forecasts sales for the current quarter to
range between $116 billion and $121 billion, below the $125.33 billion that
analysts are forecasting.
The results come as Amazon is closing all of its
brick-and-mortar bookstores, as well as its 4-star shops and pop up locations,
as the online retail behemoth reworks its physical footprint. The company also
faces a growing unionisation push from inside its workforce.
A second union election is currently underway at a company
warehouse on Staten Island, New York, the same borough where workers at a
nearby facility voted to unionise earlier this month. Amazon has filed
objections over the election with the National Labour Relations Board and is
seeking to re-do the vote.
The final outcome of a separate union election in Bessemer,
Alabama, is still up in the air with 416 outstanding challenged ballots hanging
in the balance. Hearings to review the ballots are expected to begin in the
coming weeks.
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