Warehousing and distribution costs soar, Amazon’s first-quarter results and outlook are poor – yqqlm

In the morning news on April 29, Beijing time, it was reported that Amazon’s first-quarter earnings report and performance outlook announced on Thursday were not good due to the sharp rise in warehousing and distribution costs.Shares fell 9% in after-hours trading on U.S. stocks on Thursday.

After experiencing continued sales growth during the COVID-19 pandemic, Amazon is facing a number of challenges:Amazon’s spending rises as it pays higher wages to lure workersA New York City fulfillment center is voting on whether to create Amazon’s first union in the U.S., and Amazon is contesting the vote; higher oil prices could lead to less disposable income for consumers, while leaving Amazon’s packages Shipping costs have become higher.

Amazon’s earnings outlook showed that last quarter’s price hikes for Prime membership services weren’t enough to support earnings. Amazon expects operating profit for the quarter to be between -$1 billion and $3 billion, down from $7.7 billion a year earlier.

“It’s been a tough quarter for Amazon,” said Andrew Lipsman, principal analyst at Insider Intelligence. “Trends in every key business area are headed in an unfavorable direction, and Q2’s The outlook is also bleak.”

Still, there were some bright spots in Amazon’s earnings report, such as cloud computing business AWS. Amazon’s current CEO, Andy Jassy, ​​was the head of AWS before being promoted to head of the group last year. In the first quarter, AWS revenue rose 37% to $18.4 billion, slightly above analysts’ expectations.

Jassy said Amazon has finally met the demand for warehouse staffing and storage capacity, but there is still a lot of work to be done to improve efficiency. “This may take a while, especially as we grapple with continued inflation and supply chain pressures,” he said in a release. “We’re seeing encouraging progress in some customer experience, including delivery speed. etc. We are approaching levels not seen for several months before the outbreak in early 2020.”

Amazon’s first-quarter earnings report also raised concerns about overall consumer demand. Although online store sales fell in the first quarter and the number of products sold was flat, Amazon CFO Brian Olsavsky said there was no problem with the rhythm of shoppers. So far, inflation has not depressed typical user ordering patterns.

According to the financial report, Amazon’s first-quarter net revenue was $116.4 billion, in line with analysts’ average expectations according to Refinitiv IBES statistics. Amazon reported a loss of $3.8 billion, or $7.56 a share, in the first quarter, compared with a profit of $8.1 billion, or $15.79 a share, a year earlier. That’s due in part to a $7.6 billion drop in the value of Amazon’s stake in electric-car maker Rivian.

In North America, Amazon’s largest market, sales rose 8% from a year earlier, but operating expenses soared 16% to $71 billion.

Olsavsky said Amazon’s costs increased by about $6 billion from a year earlier, with $2 billion of that coming from inflationary pressures. Specific factors include rising wages and fuel costs 1.5 times higher than a year ago. Amazon has already cut signing bonuses for new hires.

Amazon aims to optimize the movement of goods between warehouses to control expenses. Also unusually, Amazon is facing excess warehousing and shipping capacity, which cost it about $2 billion in the first quarter.

That means Amazon needs to deliver more orders to justify the extra logistics capacity, said Scott Mushkin, founder of market research firm R5 Capital. Those abilities could come in handy during Amazon’s annual big sale, Prime Day. Amazon announced Thursday that this year’s Prime Day will take place in July.

“They now have a lot of distribution and logistics infrastructure. To take advantage of those capabilities, they need order volumes,” Musykin said.

In brick-and-mortar retail, Amazon had a mixed first quarter. In March, Amazon said it planned to close 68 bookstores, pop-up stores and other household goods stores to focus more on fresh food categories. Amazon recently automated two Whole Foods stores, eliminating the need for cashiers. In the first quarter, Amazon’s brick-and-mortar store sales rose 17% year over year to $4.6 billion.

Amazon’s outlook reflects broader industry challenges. This week, UPS, one of Amazon’s delivery partners, also expects slower growth in its e-commerce delivery business.

Amazon expects second-quarter net revenue of $116 billion to $121 billion, compared with analysts’ average forecast of $125.5 billion, according to Refinitiv IBES.