Amazon stock plummets after almost $4 billion loss
Amazon announced a large loss in the first quarter, sending its shares plummeting.
The software giant reported a $3.8 billion net loss for the quarter ending March 31, compared to a $8.1 billion profit last year. It also fell short of the $4.4 billion profit expected by Refinitiv analysts.
The business blamed the loss on a $7.6 billion loss on its investment in Rivian Automotive. Rivian, whose shares Amazon invested $700 million in 2019, has lost over 75% since its November 2021 IPO.
The Amazon loss came a day after Ford (F), another early Rivian investor, reported a $3.1 billion net loss for the first quarter due to a $5.4 billion pre-tax charge.
Following the results, Amazon (AMZN) shares fell approximately 10%.
According to Amazon CEO Andy Jassy, “The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,”
Amazon’s total sales increased 7% year-on-year to $116.4 billion, exceeding analyst expectations but falling short of last year’s 9 percent growth. The firm expects sales growth of between 3% and 7% next quarter.
During the epidemic, Amazon’s consumer business grew at a dizzying pace, with its fulfilment network “doubling” in two years.
We are now focusing on enhancing productivity and cost efficiency across our fulfilment network rather than pursuing physical or manpower capacity. Although progress on a lot of customer experience criteria may be slow due to persistent inflationary and supply chain constraints, we see positive improvement.
Prime Day, Amazon’s annual sales frenzy, will take place in over 20 countries in July.
Amazon’s CFO, Brian Olsavsky, claimed rising inflation, fuel prices, and workforce shortages increased expenses by $2 billion.
“The cost to ship an overseas container has more than doubled compared to pre-pandemic rates,” he added. “The cost of fuel is approximately one and a half times higher than it was even a year ago.”
Because of the Omicron variant’s ascent towards the end of 2021, Amazon has to hire more people to make up for lost productivity, Olsavsky stated. “we quickly transitioned from being understaffed to being overstaffed,” he said, when workers returned as the variants subsided. “lower productivity” added $2 billion in costs, he claimed.
Amazon’s profits decline comes as warehouse workers continue to protest over concerns including wages and working conditions. Earlier this month, Amazon employees in Staten Island, New York, voted to create the company’s first US labour union.
Amazon has subsequently filed an appeal, asking for a re-vote.
A separate Amazon union election in Bessemer, Alabama, ended recently with undetermined results.
Concerns over Amazon’s handling of employees during the epidemic fueled both union drives, as did heightened national attention to racial justice and labour rights.