News

Amazon warns costs may eviscerate profits, shares crash | Business and Economy News

Amazon’s efforts to increase revenue may not pay off as inflation and faltering consumer demand weigh on profits.

Amazon.com Inc has warned that costs could hurt its bottom line in the current quarter, as early holiday marketing isn’t helping to drive sales growth while labor and delivery costs continue to increase.

Shares fell 19% in after-hours trading following the e-commerce giant’s dismal forecast on Thursday for the holiday quarter ending in December. The final three months of the year included some shopping events. Largest for sellers in the US including Halloween, Thanksgiving and Christmas.

Amazon looked for higher sales all over the place. It increased fees for its Prime express shipping club by 43% annually in Europe this quarter. It has imposed a fuel and inflation surcharge on some merchants, and for the first time, it has not one but two platform sales events in a year: Prime Day in July and Prime Access Sale in October.

These efforts may not pay off. Amazon’s net sales were $127.1 billion in the third quarter ended September 30, slightly below analyst expectations of $127.46 billion, according to IBES data from Refinitiv.

And for the holiday quarter, the world’s largest online retailer is forecasting net sales of $140 billion to $148 billion. Analysts were expecting $155.15 billion.

Amazon Web Services, the company’s lucrative cloud computing and data storage platform for businesses, can only help so much. While it provided much-needed operating income, like Microsoft, Amazon fell short of estimates.

It boosted third-quarter cloud sales by 28% to $20.5 billion, while analysts expected more than $21.1 billion.

Faced with high inflation and waning consumer demand, new CEO Andy Jassy has been racing to control costs across Amazon’s vast array of businesses.

For months, the online retailer has slowed warehouse openings and limited the filling of some open positions. It announced it would close its virtual healthcare service later this year, and it is scaling back its delivery efforts through small self-driving cars on sidewalks.

Its peers have seen few bright spots. In the retail sector, US online sales are expected to grow at their slowest pace in years this holiday season. Results in the tech industry were also poor this week for cloud rivals Microsoft Corp and Alphabet Inc’s Google, adding to recession fears. US consumer confidence rose in October.

Amazon’s net income fell to $2.9 billion in the third quarter, ahead of analysts’ median estimate of $2.2 billion in profit, according to IBES data from Refinitiv.

In a statement, Jassy said: “It is clear that there is a lot going on in the macroeconomic environment, and we will balance our investments to be more sensible without affecting our positions. Our main long-term, strategic bet.”

Worldwide shipping costs increased 10% in the third quarter to $19.9 billion.



Source by [author_name]

news7h

News7h: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button