Amazon expects to have just 2% to 8% growth as the consumers spend less due to inflation and rising interest rates, despite being the usual ‘peak’ season for the company
Amazon Inc. is predicted to have the slowest holiday-quarter growth in the company’s history. The company said the holiday season might not bring in large profits and the season would be smaller than expected. The shares plunged about 14% in premarket trading after the prediction. The looming recession and economic uncertainty have affected the Seattle-based company which had exceptional sales during the pandemic. The company expects to have just 2% to 8% growth as the consumers spend less due to inflation and rising interest rates, despite being the usual ‘peak’ season for the company.
Amazon Chief Financial Officer Brian Olsavsky states that the firm is taking adequate measures to prepare for the season. He also informs that the company would shut down products and services in regions where things aren’t going in favor of the company and put the money elsewhere it would seem fit. He further adds that the company is positive about holidays but is “aware of certain forces weighing” on consumers’ economic conditions. The hiring in a few businesses would also be paused for the time being as the company becomes ready to brace for the holiday season.
Advertising, Amazon Web Services, and cloud computing division which are the additional business of the company, saw no particular growth in the third quarter when compared to its usual revenue earnings. The e-commerce company’s growth in the year altogether was slow as many countries eased the Covid restrictions and people began to go back to their normal routines. The company had to shut down many experimental projects and postponed warehouse openings to be in line with the slowdown. Amazon joined other giants like Microsoft and Alphabet Inc., and Meta, whose value fell by $700 billion, announcing it a ‘train-wreck’ by Wall Street.
Amazon, however, expects net sales of $140 billion to $ 148 billion in the fourth quarter while analysts estimate sales to come in at about $156 billion. Amazon reported sales of $127.1 billion which is less than what the analysts expected for three months which ended on September 30. The profits were 28 cents a share which is less when compared to 31 cents a year earlier.
Amazon’s costs jumped to $125 billion, almost 18% despite the company’s desire to cut down expenses making it the fifth consecutive quarter where the company’s costs overtook the revenue and the number of employees working in the company rose by 5% despite of the efforts made by Chief executive officer Andy Jassy to reduce the rising expense. Andy Jassy stated that the company is trying to balance the investment to be more efficient without making compromises on its longer-term goals and also acknowledged the changes happening in the macroeconomic environment.
Changes in foreign exchange rates had a considerable share in reducing revenues as the US dollar strengthened and made the firm’s sales in other countries less profitable due to currency rate differences. Amazon expects to have these problems resume in the present period which causes a slowdown in profit growth. The company’s spending on research and development has surged 35% mirroring the bigger stock payouts on maintaining and hiring employees in a driven market environment.
Amazon gained profits and posted $2.9 billion in total income after two-quarters of losses. The firm’s stake in Rivian automotive Inc. comes to nearly 17% and the losses that occurred priorly reflect a decline in the value of the firm’s stake in Rivian Automotive Inc.
The shares fell in early trading before the stock exchanges opened on Friday after closing at $110.96. the share value had dropped around 33% in the present year through Thursday’s close.