As shoppers switch back to bricks and mortar, the Tech giant’s revenues grew at a sluggish 7% to $116.4bn in the first quarter
On April 28, Amazon announced its first loss since 2015 as costs rose, sales slowed and its investment in electric vehicle company Rivian wiped out profits. The news sent Amazon shares collapsing by 10% in after-hours trading.
In the first quarter, revenues of the tech giant grew at a sluggish 7% to $116.4bn, Amazon’s slowest growth rate in nearly two decades. The company’s sales rose by 44% to $108.5bn for the same quarter last year. Compared with a profit of $8.1bn during the same period a year ago, it lost $3.8bn for the quarter.
The company warned that there may be further losses ahead. In contrast to $7.7bn in the second quarter of 2021, Amazon expects operating income between a gain of $3bn and a loss of $1bn for the current quarter.
The loss was largely accounted for by Amazon’s stake in electric vehicle company Rivian. After shares in the electric vehicle tumbled, falling by more than 50%, Amazon, which owns close to 20% of the company, lost $7.6bn.
Andy Jassy, the Amazon chief executive officer, commented:
“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges.”
Over the quarter, gradual costs from inflation, warehouse capacity exceeding demands, and other issues had cost the company about $6bn, said Brian Olsavsky, Amazon’s chief financial officer.
Amazon was one of the biggest winners of the pandemic, registering huge jumps in sales as companies turned to Amazon Web Services (AWS), its cloud computing unit, to run their businesses, and consumers moved to shop online. AWS sales grew 37% over the quarter.
Shoppers are switching back to bricks and mortar as hospitalizations fall and Covid-19 vaccination rates increase. While online sales fell 3.3% in March, in-store shopping rose 11.2%, according to Mastercard SpendingPulse, a monthly transactions report.
Amazon as well as other online retailers are feeling the change. According to Census Bureau data, the share of retail purchases made online has declined from 15.7% in the second quarter of 2020 to 12.9% during the last three months of 2021.
But online retailers profited hugely over the pandemic, Mastercard’s survey shows. From March 2019 to March 2022, E-commerce grew over 83%, compared to a 9.4% growth rate for in-store shopping. The company is under additional pressure from employees across the country who are pushing to unionize and negotiate for benefits, better working conditions, and higher wages.
Amazon workers in Staten Island, New York, earlier this month became the first to vote for a union in the US. At a second Amazon facility in New York, votes to establish a union were counted on Monday and organizers say they have been overwhelmed with calls from other Amazon outposts to help them establish unions.
Jassy said:
“Today, as we’re no longer chasing physical or staffing capacity, 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. This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, but we see encouraging progress.”
