US economy

Amazon Posts Slowest Growth Rate in Two Decades


Amazon’s growth continued to come down from its pandemic highs, the company said on Thursday, signaling a new normal as online shopping resets amid a tumultuous economy.

Amazon reported $121.2 billion in revenue in the three months that ended June 30, up 7.2 percent from a year earlier. It was the company’s slowest growth in more than two decades, down slightly from 7.3 percent the previous quarter.

Amazon lost $2 billion, down from a $7.8 billion profit a year earlier. The loss included a $3.9 billion decline in the market value of an investment in Rivian Automotive, an electric truck maker whose shares have fallen since it went public last fall. Also, the strong U.S. dollar reduced sales by $3.6 billion, more than the company expected.

Amazon’s growth looked particularly meager versus a strong second quarter last year, when growth surged 27 percent. At the time, vaccines were still in the early stages of distribution and federal stimulus checks buoyed consumer spending. The company’s annual Prime Day deal event, which Morgan Stanley estimated generated $4.6 billion in revenue this year, was held in the second quarter last year but moved to the third quarter this year.

But the results were better than Amazon had predicted, and its shares rose more than 12 percent in after-hours trading.

“Despite continued inflationary pressures in fuel, energy and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network,” Andy Jassy, Amazon’s chief executive, said in a statement.

Amazon said it expected sales to pick up in the current quarter, rising between 13 and 17 percent, with operating income remaining lower than the same period a year earlier.

Some retail competitors have said they are experiencing changes as the pandemic arguably comes under control amid uncertain economic conditions. On Monday, Walmart told investors to expect lower profits, as consumers have responded to inflation by making fewer discretionary purchases and focusing more on groceries, which are less profitable.

On Tuesday, Shopify, which provides online services to small and midsize retailers, announced that it was laying off 10 percent of its work force. It said that at the start of the pandemic, it thought e-commerce could “permanently leap ahead by five or even 10 years,” but instead online sales activity has reverted “to roughly where pre-Covid data would have suggested it should be at this point.”

Brian Olsavsky, Amazon’s finance chief, said in a call with reporters that inflation had not appeared to affect customer behavior.

“We have not seen anything yet,” he said. “We saw demand increase during the quarter and had a very strong June.” He indicated that consumers were responding favorably to the fact that Amazon had fewer products out of stock and more available for faster delivery.

Mr. Jassy, who took over as chief executive a year ago, has called costs “a really big area of focus,” as he trims an overexpansion of vast networks of warehouse and other operational infrastructure that the company uses to fulfill and deliver customer orders.

Amazon has closed, canceled or delayed openings for more than 35 warehouses across the country, according to MWPVL International, a consulting firm that closely tracks Amazon’s operations.

The company employed 1.52 million people in the second quarter, almost 100,000 fewer than at the end of March.

Mr. Olsavsky said Amazon expected to see more cost reductions show up in its financials later in the year, as the efficiencies scale up.

Some of the more profitable parts of Amazon’s business performed better. Subscription revenue grew 14 percent, excluding currency changes, to $8.7 billion, as the price increases that Amazon announced earlier this year for its Prime membership program began rolling through customers accounts in the United States when annual subscriptions were renewed. The company said this week that Prime membership prices would increase substantially in Europe as well.

While a downturn in advertising has hit other tech companies, Amazon’s advertising grew 21 percent, excluding currency fluctuations, to $8.8 billion. Because Amazon’s ads are very “transactional,” and shown to customers as they are actively buying, they tend to perform better in downturns, Mr. Olsavsky said.

Amazon Web Services, the cloud computing division, grew 33 percent to $19.7 billion. It remained a disproportionate driver of profit. While it generated 16 percent of sales, it produced $5.7 billion in profit. In contrast, Amazon’s retail business lost $2.4 billion.



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