Amazon emerged as the essential store for homebound shoppers during the coronavirus pandemic, propelling its sales and profits to new highs. Now, the rush online is slowing down as vaccinated consumers peel away from computers and smartphones and revert to old habits like travelling and dining out.
The world’s biggest e-commerce retailer on Thursday reported sales and gave a forecast that fell short of expectations. The shares declined 8 per cent at 9.34am EST, for the biggest drop since May 1, 2020, the first time Amazon missed quarterly sales estimates since 2018.
The Seattle-based company invested billions to operate through the pandemic while minimising the spread of Covid-19 through its sites and hiring hundreds of thousands of workers to meet crushing demand.
The company's new chief executive, Andy Jassy, who took the helm from founder Jeff Bezos on July 5, has to convince investors that Amazon continues to be a good long-term bet even though revenue growth is slowing and the company faces heightened scrutiny from regulators in the US and Europe, its biggest markets.
“They just don’t have the tailwinds they had last year,” said Brian Yarbrough, an analyst at Edward D Jones & Co. “It just becomes the law of large numbers. There’s just no way it can be sustained.”
Investors overlooked better-than-predicted profits and a strong performance in the quarter from the company’s advertising business and Amazon Web Services cloud unit. Instead they focused on slowing growth for the company’s core e-commerce business, which the company's chief financial officer, Brian Olsavsky, said would continue through the year.
Higher expenses also will linger as Amazon keeps adding capacity and hiring workers to meet demand that has jumped in the past two years, he said. Some sites are handling double the package volume they did two years ago, he added, and Amazon must compete in the labour market for employees as more and more businesses reopen, which will add to costs.
Amazon is working to have more of its employees vaccinated and hopes the Delta variant of the virus can be controlled even if that means “people are getting out more and doing other things besides shopping,” Mr Olsavsky said. “It’s a good phenomenon.”
Revenue will be $106bn to $112bn in the period ending in September, Amazon said, while operating profit will be $2.5bn to $6bn. Analysts, on average, projected $8.11bn in profit on sales of $118.7bn, data compiled by Bloomberg showed.
Second-quarter sales increased 27 per cent to $113.1bn, missing estimates of $115bn. Profit was $15.12 a share in the period ended June 30, compared with the average estimate of $12.28.
Mr Bezos remains executive chairman and the exact nature of his new role is a work in progress.
He has said he wants to focus his attention on new initiatives, which suggests Mr Jassy will oversee the day-to-day of Amazon’s business. Mr Jassy previously ran the cloud unit.
Amazon Web Services revenue jumped 37 per cent in the quarter to $14.8bn — the biggest year-over-year sales jump in two years. The company’s “other” revenue category, primarily advertising sales, gained 87 per cent to $7.92bn, with both units topping analysts’ estimates.
Amazon’s gains during the pandemic came from adding more Prime members, who pay monthly or annual fees in exchange for shipping discounts and other perks. Amazon had 153 million Prime members in the US at the end of June, up 25 per cent from a year earlier, Consumer Intelligence Research Partners reported.
Prime members shop more frequently on Amazon and spend about twice as much on the site as non-Prime members.
Despite big e-commerce investments by competitors that include Walmart, Target and Best Buy, Amazon remains the unrivalled e-commerce leader in the US, its biggest market.
US shoppers will spend $367bn on Amazon this year, up 15.3 per cent from 2020, eMarketer Inc said. Amazon’s 40.4 per cent share of all online spending in the US is bigger than its next nine competitors combined.
The company continues to expand its workforce. It had almost 1.34 million employees worldwide as of June 30, up 52 per cent from a year earlier. Mr Olsavsky said Amazon is recruiting workers in a tight labour market by offering competitive wages and benefits.
Company%20profile
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My Cat Yugoslavia by Pajtim Statovci
Pushkin Press
The years Ramadan fell in May
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Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
What can you do?
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
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You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
Dr Afridi's warning signs of digital addiction
Spending an excessive amount of time on the phone.
Neglecting personal, social, or academic responsibilities.
Losing interest in other activities or hobbies that were once enjoyed.
Having withdrawal symptoms like feeling anxious, restless, or upset when the technology is not available.
Experiencing sleep disturbances or changes in sleep patterns.
What are the guidelines?
Under 18 months: Avoid screen time altogether, except for video chatting with family.
Aged 18-24 months: If screens are introduced, it should be high-quality content watched with a caregiver to help the child understand what they are seeing.
Aged 2-5 years: Limit to one-hour per day of high-quality programming, with co-viewing whenever possible.
Aged 6-12 years: Set consistent limits on screen time to ensure it does not interfere with sleep, physical activity, or social interactions.
Teenagers: Encourage a balanced approach – screens should not replace sleep, exercise, or face-to-face socialisation.
Source: American Paediatric Association
UFC Fight Night 2
1am – Early prelims
2am – Prelims
4am-7am – Main card
7:30am-9am – press cons
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
