Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Amazon predicts sales growth slowdown for holidays, crushing shares

Stock Markets Oct 27, 2022 10:25PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The Amazon logo is seen at the company's logistics centre in Boves, France, October 6, 2021 REUTERS/Pascal Rossignol/File Photo
 
MSFT
-2.36%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
GOOGL
-2.75%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
AMZN
-8.43%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LMT
+0.41%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
MS
+0.22%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NFLX
-0.27%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Jeffrey Dastin and Tiyashi Datta

(Reuters) -Amazon.com Inc on Thursday forecast a slowdown in sales growth for the holiday season, disappointing Wall Street and warning that inflation-wary consumers and businesses had less money to spend.

Amazon (NASDAQ:AMZN)'s 12% extended-trade stock drop erased about $140 billion in its market capitalization, greater than the entire value of companies such as Morgan Stanley (NYSE:MS), Netflix (NASDAQ:NFLX) and Lockheed Martin (NYSE:LMT).

For months, the world's biggest online retailer has fought against troubling macroeconomic tides. It hosted not one, but two cornerstone sales events in a year: Prime Day in July, and the Prime Early Access Sale this month.

For the summer event, it sold more items than ever before to its Prime loyalty shoppers, and, meanwhile, the company sought revenue from higher Prime subscription fees and a surcharge on some merchants.

Net sales were $127.1 billion in the third quarter that ended Sept. 30, still a little lower than the $127.5 billion analysts expected, according to IBES data from Refinitiv.

But the macro outlook has not brightened. In a call with reporters, Amazon Chief Financial Officer Brian Olsavsky said the company was bracing for slower economic growth.

"We are seeing signs all around that, again, people's budgets are tight, inflation is still high, energy costs are an additional layer on top of that caused by other issues," he said. "We are preparing for what could be a slower growth period, like most companies."

European consumers in particular have spent less than their American counterparts, pinched by the war in Ukraine and higher fuel costs, which likewise increased Amazon's expenses, he told reporters and analysts. The company's international-segment operation loss widened to $2.5 billion in the third quarter from $0.9 billion a year prior.

While Amazon would continue to fund earlier-stage businesses like its lucrative cloud-computing and advertising divisions, it would question costs elsewhere and proceed carefully on hiring, Olsavsky said.

Wedbush Securities analyst Michael Pachter said, "It’s possible that retail sales will decline year-over-year. I don’t actually believe that will happen, but the market definitely doesn’t like it."

Amazon forecast net sales of between $140 billion and $148 billion, or growth as little as 2% from a year earlier. Analysts were expecting $155.2 billion.

Prior holiday quarter sales growth was 9% in 2021 and 38% in 2020.

CLOUD MISSES

Across the retail sector, U.S. online sales are expected to rise at their slowest pace in years this holiday season. Consumer goods company Unilever (NYSE:UL) PLC likewise believes "sentiment in Europe is at an all-time low," its chief financial officer said earlier.

Results in the tech industry were just as poor this week for cloud-computing rivals Microsoft Corp (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) Inc's Google, adding to recession fears. U.S. consumer confidence did a U-turn in October.

"Big tech companies are not impervious to slowdowns in the economy, particularly if they are consumer driven," said Rick Meckler, partner at Cherry Lane Investments in New Jersey.

Amazon Web Services (AWS), the company's lucrative data-storage and computing division serving enterprises, only helped so much. While it provided much-needed operating income, just like rival Microsoft's Azure cloud, Amazon fell short of estimates.

Amazon's cloud sales growth has ticked down consistently in the past year. Net sales there grew 28% in the July-September period versus 39% a year earlier, when adjusted for changes in foreign exchange.

Paolo Pescatore, analyst at PP Foresight, said, "With so much unpredictability there is huge concern, which is impacting confidence among enterprises to invest. In turn, it is hitting the broader cloud sector and companies such as AWS and Azure."

Facing high inflation and receding consumer demand, Amazon's Chief Executive Officer Andy Jassy has raced to control costs across the company's vast array of businesses.

Amazon has slowed warehouse openings and refrained from filling some open positions. It announced it would shut down its virtual healthcare service by year-end, and it is scaling back a long-touted effort to deliver goods via small autonomous sidewalk cars.

Still, worldwide shipping costs grew 10% in the third quarter to $19.9 billion. Amazon's net income also decreased to $2.9 billion in the third quarter, while beating analysts' average estimate of a $2.2 billion profit, according to IBES data from Refinitiv.

In a statement, Jassy said, "There is obviously a lot happening in the macroeconomic environment, and we’ll balance our investments to be more streamlined without compromising our key long-term, strategic bets."

Amazon predicts sales growth slowdown for holidays, crushing shares
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Red Riley
Red Riley Oct 27, 2022 10:11PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
how could it not we are in a recession
Joe Lock
Joe Lock Oct 27, 2022 7:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I'm finding it cheaper to order straight from suppliers then through Amazon.
William Hartzell
William Hartzell Oct 27, 2022 7:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes Joe...not always, but sometimes for sure. I have also found that free shipping purchases of ($25+) often come just as quick as prime member orders
Casador Del Oso
Casador Del Oso Oct 27, 2022 7:20PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
A lot of mutual funds own Amazon. Most people's 401(k) plans own these mutual funds. So it is quite possible that a person's 401(k) has lost more money YTD than any of the 4 big indexes.
Jane Doe
Jane Doe Oct 27, 2022 4:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Drop 20%? What a sale.
Brad Albright
Brad Albright Oct 27, 2022 4:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Still a P/E of around 80.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email