Customers are shopping offline again
Amazon presents disappointing figures
04/28/2022, 11:31 p.m
As inflation rises, the pandemic is ebbing in several countries. Both developments are putting pressure on Amazon. Rising costs and a decline in online purchases mean mail order is posting its weakest growth in more than two decades.
Amazon has faced headwinds in the first quarter. After the pandemic has subsided, customers are no longer shopping online as regularly, and high inflation is also having a dampening effect. The online retailer recorded its weakest quarter in more than two decades with growth of 7 percent. Analysts had expected sales to increase by 7.4 percent. However, profit drivers were once again the cloud computing business. For the current quarter, however, the e-commerce giant expects a further decline in operating profit.
Amazon reported revenue of $116.4 billion for the first quarter. That was almost as much as analysts had expected at $116.5 billion. The US group had announced net sales of between 112 and 117 billion dollars. Operationally, profits collapsed to $3.7 billion, according to additional information. Announced were $3 billion to $6 billion, compared to $8.9 billion in the first quarter of 2021.
On balance, Amazon.com posted a loss of $3.8 billion, down from a profit of $8.1 billion a year ago. The loss per share was $7.56 after a profit of $15.79. Analysts had expected earnings per share of $8.35 on average. Since the result was significantly weaker than expected, the share price collapsed by more than 10 percent in after-hours trading in a first reaction in the USA. Amazon cited a $7.6 billion loss from valuation losses on its stake in electric car maker Rivian.
Prime membership fees increased
But Amazon is also struggling with rising costs on a number of fronts. In order to react operationally to the rising costs, Amazon had increased the fees for Prime membership for the first time since 2018, which gives customers more services such as free delivery.
Cloud division Amazon Web Services (AWS) continued to be Amazon’s top contributor during the quarter. The group reported AWS operating profit of $6.5 billion – operating profit for this division alone significantly exceeded operating profit at the group level and offset losses in other areas. Revenue at AWS, which leases computing, storage and network capacity to users, rose to $18.4 billion in the first quarter (previous year: $13.5 billion).
Amazon’s e-commerce business made far more sales but was unprofitable, especially outside the US. Amazon reported a $1.6 billion operating loss on US sales of $69.2 billion. In the international business, the operating loss was $1.3 billion.
For the second quarter, Amazon expects operating profit of between minus 1 and plus $3 billion, compared to plus $7.7 billion in the first quarter of 2021. The group sees net sales of between $116 and $121 billion, an increase of 3 to 7 percent .