Amazon's Covid-era buildout proves too much as demand cools

Amazon.com acknowledged that a hiring and warehouse-building binge during the pandemic is catching up with the company as e-commerce sales growth inevitably slows from the torrid pace of the outbreak.

That reality will weigh on revenue and profit going forward as consumers return to their pre-pandemic habits and inflation may cool their spending. Fuel and labour costs are already biting, and executives said Amazon was watching for whether shoppers will trim their purchases to offset rising prices.  

Amazon said it lost money during the first quarter and gave a forecast that said it may see another loss in the current period. Sales will be as much as $121 billion in the three months ending in June, missing analysts’ average estimate of $125 billion.

It’s an unwelcome development for Chief Executive Officer Andy Jassy, who has inhabited the top job for less than a year and signaled that it would take time for the company to get a handle on economic pressures and an overbuilt logistics network that is hampering Amazon’s productivity. 

“Losing money in North America just seems like something investors thought we were beyond,” said Brian Yarbrough, an analyst at Edward Jones. 
 

The dour results and forecast sent shares down about 13 per cent in early trade on Friday.

Before the earnings report, Wall Street analysts had been almost unanimous in their optimism about Amazon’s prospects, citing the massive investments in package handling and delivery facilities. But Chief Financial Officer Brian Olsavsky said the company’s rapid expansion left it with too much warehouse capacity and too many workers, which will take a while to work through.