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Amazon takes hit from foggy outlook – Reuters.com

The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018.

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NEW YORK, April 28 (Reuters Breakingviews) – The pandemic was good for Amazon.com (AMZN.O). But a fog has settled, caused by macroeconomic factors. While the e-commerce giant has some bright patches, shipping, wage costs and war are stumbling blocks that make it hard to see clearly ahead.

The company flashed warning signs in its first-quarter earnings report on Thursday. For one, expenses ballooned, especially for online order fulfillment, where costs rose by about a quarter. Meanwhile, the top line of $116 billion, an increase of 7% year-over-year, didn’t keep pace. That helped send operating income down nearly 60%.

That could explain an after-hours wipeout of some $140 billion, or around 10%, from Amazon’s market value. Chief Executive Andy Jassy suggested the war in Ukraine has brought challenges. International sales dipped, and in North America the operating loss was almost $2 billion.

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The company’s bottom line was pushed into the red for the quarter by a mark-to-market hit on its investment in electric-vehicle maker Rivian Automotive (RIVN.O), a fate shared in the period by fellow Rivian investor Ford Motor (F.N). To top it off, Amazon’s sales forecast for current quarter fell below read more Wall Street expectations.

Yet the lucrative cloud segment, Amazon Web Services, notched a 37% year-on-year increase in sales to more than $18 billion. The business sports a chunky 35% operating margin, too. And while overall revenue growth looked slow compared to the home-delivery go-go days of early 2021, Amazon’s total revenue for the quarter was 54% up on the same period two years ago, at the end of which the pandemic took hold.

So it’s not all gloom and doom. But after spending to meet rapidly rising demand, Jassy now has his work cut out to keep costs in line with softer growth.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

– Amazon.com on April 28 reported first-quarter revenue of $116 billion, an increase of 7% year-over-year and roughly in line with what analysts on average were expecting, according to Refinitiv.

– The company posted a net loss of $3.8 billion, or $7.56 per share, compared with earnings of $8.1 billion, or $15.79 per share, in the same period a year ago. The net loss includes a pretax mark-to-market loss of $7.6 billion on its investment in electric-vehicle maker Rivian Automotive.

– Amazon’s shares were down nearly 10% in after-hours trading at around 5 p.m. EDT on April 28.

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Editing by Richard Beales and Sharon Lam

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