Get the app today! Download iPhone App Download Android App

Amazon Sees Sales Growth Slow As Jassy Gets Down To Business

Published on Jul 30 2021 8:09 AM in Technology tagged: Featured Post / E-Commerce / Amazon / Online / Jeff Bezos / Andy Jassy

Amazon Sees Sales Growth Slow As Jassy Gets Down To Business

Amazon expects sales growth to slow over the next few quarters as customers venture more outside the home, indicating a somewhat tepid start to new chief executive Andy Jassy's reign.

Spending growth by Prime members, Amazon.com's most valuable customers, has eased as well, the company said.

When bricks-and-mortar stores closed, Amazon posted record profits, drew more than 200 million Prime loyalty subscribers, and recruited over 500,000 workers to keep up with surging demand. With businesses now reopening, the business is facing a reversal of that trend, at least in part.

While revenue surged 44% in the first quarter of this year, that figure dropped to 27% for the period ended June 30. Sales may only rise as much as 16% in the third quarter, Amazon said.

“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic," Andy Jassy, Amazon CEO, commented.

“Thank you to all of our passionate, innovative, mission-driven employees around the world for continuing to stay focused on delivering for customers—I am very excited to work with you as we invent and build for the future.”

Amazon's Quarterly Performance

Brian Olsavsky, Amazon's chief financial officer, attributed the group's quarterly performance to a difficult comparison to last year, when consumers stayed more indoors and relied on e-commerce for their everyday needs. In the United States and Europe, customers are now out and about.

They are "doing other things besides shopping," he said.

Revenue was $113 billion (€95.05 billion) for the second quarter, shy of analysts' average estimate of $115 billion, according to IBES data from Refinitiv. Profit rose 48% to $7.8 billion, the second-largest Amazon ever announced.

Amazon, which recently appointed former Tesco veteran Tony Hoggett to run its store portfolio, expects this lower growth to continue for the next few quarters, Olsavsky told reporters.

The outlook comes just after Jassy on July 5 inherited Amazon's top job, which has never been bigger or more complex. Last quarter Amazon announced a deal to buy the film studio MGM for $8.5 billion, expanding in Hollywood at the same time as it is running a grocery chain, building a healthcare business and facing scrutiny from regulators worldwide.

Olsavsky said the company hopes COVID-19 will subside and that the economy will continue to bounce back. While peers Alphabet Inc and Facebook Inc said they will require vaccines for workers returning to offices, Amazon has made no such announcement.

The company in the pandemic has grappled with staff protests over safety precautions and a high-profile, failed unionisation bid in a facility in Bessemer, Alabama.

Advertisement

Brian Yarbrough, an analyst with Edward Jones, said it was "not feasible" for Amazon to maintain its breakneck pace.

"It's still phenomenal growth when you think of the sheer size of the business," he said. "Obviously the pandemic helped them, but they're not going to be able to grow that rapidly on top of those numbers."

Labour Issues

The world's biggest online retailer had moved its annual marketing blitz, Prime Day, to June, hoping to peddle goods before shoppers headed out on vacation. This only helped so much: Sales since May 15 have been up just in the mid-teens excluding Prime Day, Olsavsky told analysts.

Amazon Web Services has fared better. The cloud computing division that Jassy long ran grew revenue 37% to $14.8 billion, ahead of estimates of more than $14.1 billion. Though AWS has lowered prices, it has signed new multi-year agreements with large customers, Olsavsky said.

Enormous challenges have come with Amazon's size.

Costs continue to rise, aside from the $200 million in extra stock Amazon plans to pay Jassy over the next 10 years. The company has offered an average $17 in hourly wages plus signing bonuses to attract 75,000 workers during a labor shortage.

Olsavsky said he expects wage pressure to stay for the near future, as industry reopenings, government payments and back-to-school impact individuals' willingness to work.

"It's a very competitive labor market out there, and certainly the biggest contributor to inflationary pressures that we're seeing in the business," he said.

Olsavsky said Jassy has "hit the ground running," though Bezos would continue to weigh in on decisions where there was no turning back.

"We've had a good handoff," Olsavsky said. But Bezos "will not be leaving. He's obviously continuing to be very involved."

News by Reuters, edited by ESM. For more Technology news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email