Amazon reported its first quarterly loss since 2015 on Thursday, as its profit-making juggernaut was stymied by a pandemic-induced slowdown in online shopping and a huge writedown in its investment in an electric vehicle startup.
Shares of the Seattle-based e-commerce giant fell 9% in after-hours trading.
Amazon reported a loss of $3.84 billion, or $7.56 per share, for the first three months of the year. A year ago, it reported earnings of $8.1 billion, or $15.79 per share, for the first quarter. Wall Street analysts had expected earnings of $8.35 per share in the latest quarter, according to FactSet.
The ocean of red ink in Amazon’s report stemmed primarily from the company’s recognition of a $7.6 billion impairment loss on its equity investment in Rivian Automotive. Rivian went public in late 2021 and its stock traded near $180 at one point. It closed Thursday at $32.18. Ford Motor Co. on Wednesday announced a similar writedown in the value of its investment in Rivian.
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Meanwhile, sales from Amazon’s cloud computing business, which helps power the online operations of Netflix, McDonald’s and other companies, rose 37% in the quarter. And sales from its advertising business, where brands pay to have their products appear first when shoppers search on Amazon’s site, rose 25%.
Yet the slowdown in online spending is real and widespread. As in-store sales increased, March is the first month to show a drop in online sales since the start of the pandemic, according to Mastercard SpendingPulse, which tracks spending on the Mastercard payment network and survey estimates. for other payments made in cash and by cheque.
Amazon has thrived during the COVID-19 pandemic as housebound people eager to limit human contact have turned to the internet to buy what they need. But growth has slowed as vaccinated Americans feel more comfortable going outside. According to e-commerce research firm MarketPlace Pulse, the value of goods sold on Amazon last year increased by half compared to 2020.
Like many others, Amazon is facing inflation pressure and supply chain issues. Over the past two years, Amazon chief financial officer Brian Olsavsky said the company has doubled the size of its operations and nearly doubled its workforce. He said labor shortages and lack of physical space are no longer major issues, but the company continues to face various pressures such as rising shipping costs.
Inflation-related expenses added about $2 billion in additional costs over last year, Olsavsky said, adding that the company also incurred an additional $4 billion in costs related to lost productivity and to other inefficiencies.
“The pandemic and subsequent war in Ukraine has brought about unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement. “Our teams are fully focused on improving productivity and profitability across our fulfillment network. We know how to do this and we’ve done it before.
To offset rising fuel prices and inflation, the retail giant has added a 5% surcharge to the fees it charges third-party sellers who use its fulfillment services. Last quarter, Amazon also increased its annual Prime membership fee by $20, a first since 2018. Despite the fee hike, Olsavsky said millions of new Prime members signed up during the quarter.
Revenue rose 7% to $116.44 billion from $108.52 billion in the first quarter of 2021, marking the company’s sixth consecutive quarter of revenue exceeding $100 billion. Amazon had forecast sales between $112 billion and $117 billion. Analysts polled by FactSet expected $116.5 billion.
“Given the pace at which the business has grown over the past few years, this change is hardly surprising,” said Neil Saunders, Managing Director of GlobalData Retail. “This represents more of a post-pandemic reset than a catastrophic failure. Still, the slowdown raises important questions about how Amazon can restore momentum and regain its leadership position as one of the key drivers of online growth.
Amazon said it expects sales for the current quarter to be between $116 billion and $121 billion, below the $125.33 billion forecast by analysts.
The findings come as Amazon closes all of its physical bookstores, along with its 4-star stores and pop-up locations, as the online retail giant reworks its physical footprint. The company is also facing a growing push for unionization from within its workforce.
A second union election is currently underway at a company warehouse in Staten Island, New York, the same borough where workers at a nearby facility voted to unionize earlier this month. Amazon has filed objections to the election with the National Labor Relations Board and is seeking to redo the vote.
The final result of a separate union election in Bessemer, Alabama is still up in the air with 416 outstanding disputed ballots pending. Hearings to review the ballots are expected to begin in the coming weeks.