Amazon’s online sales growth slows as lockdowns ease
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The loosening of lockdown restrictions around the world meant Amazon’s customers were increasingly “doing things besides shopping”, the ecommerce company said, as it posted weaker than expected sales for the year’s second quarter.
Dragging Amazon’s top line was its core online store business, which grew 15 per cent, the slowest rate since 2019, despite it bringing forward its flagship Prime Day sales event to June.
Brian Olsavsky, Amazon’s chief financial officer, told reporters the deceleration was “essentially a combination of lapping last year’s Covid strength”, when demand for online shopping surged to record levels.
Vaccinated communities with loosened lockdown rules meant it was “seeing among our customers in especially United States and Europe, people are getting out more doing other things besides shopping”, he added, noting spending by customers with Prime memberships had “moderated”.
Amazon’s earnings at a glance
Actual versus estimates
Revenue: $113.1bn vs $115.1bn
Net income $7bn vs $6.4bn
EPS $15.12 vs $12.32
Gross margin 43.3 per cent vs 41.6 per cent
AWS (cloud) revenue $14.8bn vs $14.2bn
Sources for estimates: S&P Capital IQ and FactSet
Amazon’s cloud computing division, AWS, continued to perform strongly, as companies accelerated plans to move to the cloud. The segment posted $14.8bn in revenue in the second quarter, compared to $10.8bn in the same period last year — the second straight quarter of above 30 per cent growth.
Overall revenues increased 27 per cent from last year to $113bn, falling short of forecasts for about $115bn, according to consensus data from FactSet. Profit rose 50 per cent compared to the same period last year, to $7.8bn.
Amazon also forecast its profits would fall in the current quarter when compared to the same period last year, and predicted operating income for July through September would be between $2.5bn and $6bn, compared with $6.2bn a year ago.
The company’s “other” business, which primarily consists of its nascent advertising efforts, continued to post strong growth. Revenue for the segment surged by 88 per cent compared to the same period last year to $7.9bn, a time when companies pulled back advertising budgets as the pandemic took hold.
The earnings mark Amazon’s final quarter under the stewardship of founder Jeff Bezos, who stepped aside as chief executive at the beginning of the month on the 25-year anniversary of the company’s founding. He was replaced by Andy Jassy, formerly chief executive of AWS.
The shares fell about 7 per cent in after-hours trading. The company had been trading up by just over 12 per cent since the beginning of the year.
“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic,” Jassy said in a statement.
“At the same time, AWS has helped so many businesses and governments maintain business continuity, and we’ve seen AWS growth reaccelerate as more companies bring forward plans to transform their businesses and move to the cloud.”
The company said it had incurred $1.5bn in costs directly related to dealing with Covid-19, such as distancing measures at its warehouses. It brings the total cost since the start of the pandemic to approximately $15bn.
Olsavsky said Amazon would not follow other tech groups, such as Google and Facebook, in mandating vaccines among its staff. He said its plan to return to offices in September still stood.