Amazon results and outlook fall short as warehouse, fuel costs soar

Amazon.com Inc delivered a disappointing quarter and outlook on Thursday as the e-commerce giant was swamped by higher costs to run its warehouses and deliver packages to customers.

After a long-running surge in sales during the COVID-19 pandemic, Amazon is facing a litany of challenges. The company's expenses swelled as it offered higher pay to attract workers. A fulfillment center in New York City voted to create Amazon's first US union, a result the retailer is contesting. And the higher price of fuel risks diminishing consumers' disposable income just as it is making delivery more expensive for Amazon, the world's biggest online retailer.

Amazon's forecast shows hiking the price of its fast-shipping club Prime last quarter may not be enough to prop up its profit. The company expects to lose as much as US$1 billion in operating income this quarter, or make as much as $3 billion. That's down from an operating profit of $7.7 billion in the same period last year.

"This was a tough quarter for Amazon with trends across every key area of the business heading in the wrong direction and a weak outlook for Q2," said Insider Intelligence principal analyst Andrew Lipsman.

Still, there were bright spots, like Amazon Web Services, the division that new CEO Andy Jassy ran before taking the company's top job last year. The unit increased revenue 37 per cent to $18.4 billion, slightly ahead of analysts' estimates.

Jassy said the company has finally met its warehouse staffing and capacity needs, but it still has work to do in improving productivity.

"This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, he said in a press release. "We see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020."

Inflation hits Amazon

Amazon's results called consumer demand into question. While online store sales dipped and the number of products it sold was flat in the first quarter, the retailer's

Chief Financial Officer Brian Olsavsky said the company was pleased with the pace of shoppers' purchases. Inflation had not depressed typical ordering patterns so far, he said.

Net sales were $116.4 billion in the first quarter, in line with analysts' expectations, according to IBES data from Refinitiv.

Amazon reported a loss of $3.8 billion, or $7.56 per share, compared with a profit of $8.1 billion, or $15.79 per share, a year earlier. That partly reflected a $7.6 billion decline in the value of its stake in electric vehicle maker Rivian.

In North America, the company's largest market, sales rose 8 per cent while operating expenses soared 16 per cent to $71 billion.