Amazon's holiday-quarter forecast disappoints as labour and supply issues mount

E-commerce company missed on third-quarter earnings projections

Amazon on Thursday reported a slump in profit that it expects will continue through the holiday quarter, as heavy spending to maintain delivery operations diminishes the company's windfall from online shopping.

Shares fell 4 per cent in after-hours trading.

After a year of blockbuster results, the world's largest online retailer is facing a tougher outlook. In a tight labour market, it has boosted average pay and marketed ever bigger signing bonuses to attract blue-collar workers it needs to keep its high-turnover operation humming.

The company meanwhile is contending with global supply chain disruptions. To manage, it has doubled its container processing ability, expanded its delivery service partner programme and is ramping up its warehouse investments.

But that all comes at a cost. The company said it expects operating profit for the current quarter to be between $0 and $3 billion, short of $6.9bn Amazon posted the year prior.

Andy Jassy, who took the helm of Amazon as chief executive in July, said in a press release that the company would incur several billion dollars of extra expenses in its consumer business to deal with higher shipping costs, increased wages and labour shortages.

Amazon is “doing whatever it takes to minimise the impact on customers and selling partners this holiday season,” he said.

“It’ll be expensive for us in the short term, but it’s the right prioritisation for our customers and partners.”

The retailer has strived to prevent a repeat of the 2013 season when delays left some without presents on Christmas Day.

To juice sales, the company started encouraging customers to shop holiday deals as early as October 4 this year.

The e-commerce company forecast fourth-quarter sales to be between $130bn and $140bn. Analysts were expecting $142.05bn, IBES data from Refinitiv showed.

Retailers are facing supply shortages of everything from toys, Nike trainers to laptops, making it difficult for them to stock up their shelves for the holiday season.

Amazon also missed expectations for third-quarter sales, which grew at their slowest pace since the Covid-19 outbreak, as consumers returned to stores after shopping online from their homes for over a year.

Total net sales rose to $110.81bn in the third quarter ended Sept. 30, from $96.15bn, a year earlier.

Analysts had predicted $111.60bn, IBES data from Refinitiv showed.

Updated: October 28th 2021, 9:40 PM