Amazon shares plunge on release of rising costs and falling demand as COVID eases | Business Newsletter
Shares of Amazon fell 10% after the e-commerce to streaming giant admitted it was struggling with the weight of costs that could affect its operations.
The company’s first-quarter results include a first-quarter loss since 2015 despite a $3.8 billion hit attributed to an investment in electric vehicle startup Rivian of 7.6 percent. billion dollars.
However, the red ink was overshadowed by its forecasts showing a wave of Amazon which has worked well during the COVID crisis so far has dissipated well and indeed.
It expects to lose up to $1 billion in operating income between April and June — or make $3 billion.
Both amounts were down from operating profit of $7.7 billion in the same period last year as the business benefited from pandemic-wary consumers shopping from the comfort of their homes and taking advantage of the pandemic. enjoy the additional benefits of a Prime membership.
Amazon points out that demand for online shopping is slowing at a time of rising costs – mainly related to energy.
The difficulties are also related to global supply chain disruptions and labor shortages, as the company has had to offer more money to attract employees.
It has tried to combat these additional costs by increasing the fees for its Prime membership, and it has also added a 5% surcharge to the fees it charges third-party merchants who use the service. its performance.
However, its operating profit forecast suggests the actions will not be enough to counter the bullish bills at the time. Consumer demand is also facing pressure from higher inflation – at a 40-year high in its core market, the United States.
First-quarter revenue missed estimates, coming in at $116.4 billion — up 7% year-over-year in 2021.
Andy Jassy, Amazon’s chief executive officer, said the company has finally met its demand for capacity and warehouse workers, but it still has a lot of work to do in improving productivity at this time. they are facing increasing pressure from the workforce to demand union representation.
“This could take some time, especially as we face ongoing inflationary pressures and supply chain pressures, but we see progress,” he said of productivity. The set is encouraging across several customer experience dimensions, including delivery speed performance as we are reaching levels not seen since the months immediately before the pandemic in early 2020.”