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Amazon; has the collapse started?

Amazon pays $500,000 over claims of concealed Covid-19 cases

This week’s equity-based roundup is on Amazon. On Friday, November 25, thousands of Amazon warehouse workers across about 40 countries took part in protests and walkouts, which coincided with Black Friday sales; one of the busiest days of the year for online trading.

The campaign dubbed “Make Amazon Pay” charges Amazon with squeezing every last drop it can from workers, communities, and the planet in the face of the cost of living crisis, and therefore demanded better wages and working conditions. The workers’ charges include Amazon’s attack on workers trying to organise in trade unions, high level of surveillance in warehouses to speed up work, and workers not having break times.

Tension with workers has been a long-running issue at the e-commerce giant, which has faced complaints of unfair labour practices as well as employee activism and union drives at some facilities.

Football Highlights

Amazon like the rest of Big Tech has had a rocky year so far as it confronts macroeconomic headwinds, soaring inflation, and rising interest rates. Amazon’s core retail business has been hit hard, as consumers returned to shopping in stores.

The company reported its third-quarter earnings on October 27 and following missed revenue estimates and a disappointing sales forecast for the fourth quarter, its shares plummeted 13% in extended trading on October 27 and between October 25 and November 3, 2022, tumbled 26%.

On November 9, the stock fell 4.3%, bringing the company’s market value to $879 billion compared with the record close of $1.88 trillion in July 2021, thus becoming the world’s first public company to lose a trillion dollars in market value amid a broader brutal tech selloff triggered by inflation and disappointing earnings.

In Q3 2022, revenue grew 15%, marking a return to double-digit sales expansion, but it still fell short of Wall Street’s projections. Operating income decreased to $2.5 billion in the third quarter, compared with $4.9 billion in the third quarter of 2021, while Net income decreased to $2.9 billion in the third quarter, or $0.28 per diluted share, compared with $3.2 billion, or $0.31 per diluted share, in third quarter 2021.

The company said it expects to post Q4 revenue between $140 billion and $148 billion, representing year-on-year growth of 2% to 8%.  But analysts were expecting sales to come in at $155.15 billion.

The Q3 disappointing result is the second time this year that the company’s results have been disappointing.  In April, a weak forecast for Q2 led to a 14% drop in the stock price.

The company linked the disappointing performance to macroeconomic headwinds. CFO Brian Olsavsky said in an earnings call “The continuing impacts of broad-scale inflation, heightened fuel prices and rising energy costs have impacted our sales growth as consumers assess their purchasing power and organizations of all sizes evaluate their technology and advertising spend,”

The company has responded to rising expenses by tightening its belt and aggressively cutting costs. Just like Walmart, it has started closing its modern locations, shutting down several warehouses, downsizing of its workforce, and abandoning several of its expansion plans.

The company closed almost 68 retail stores, with 66 of them located in the United States; ending Amazon E-books, 4-star, and Pop Up shops, which sell a range of electronic gadgets.

Six of its Whole Foods grocery operations have been scheduled to close down. Whole Foods is one of its most successful business models acquired in 2017. It constitutes the bulk of Amazon’s grocery operations with more than 500 locations around the United States.

The company also announced that it is scrapping its plans to build dozens of warehouses across the United States.  Reportedly 71 warehouses have already been shut down this year.

In the second quarter, Amazon disclosed plans to reduce its staff force by 99,000 after consumers started to back off from discretional spending.  A couple of weeks ago, the e-commerce giant announced that it will start to lay off about 10,000 staff this month.

Its billionaire founder, Jeff Bezos recently shared an ominous warning, telling consumers and business owners that hard times are coming.  He advised people to start holding off their purchases and save money to navigate the downtime.  He advised that this may not be the right time for workers to spend their yearly bonuses, especially on big purchases such as cars, large-screen televisions, etc.

With its billionaire founder warnings, the workers’ protests, disappointing Q3 earnings, coupled with the company’s decision to lay off 10,000 staff, the numbers are grim and the outlook is even grimmer. Indeed, this is a challenging period for the e-commerce giant.

 

 

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