Amazon reported for the third quarter of 2021 worse than analysts' expectations and made a weak forecast for the next, holiday quarter. After the report, the company's shares fell by 4%, to 3309 $.
Here are the main results:
- revenue increased by 15%, up to $110.8 billion;
- operating profit fell by 22%, up to 4.9 billion;
- net profit fell by 50%, up to 3.2 billion.
According to Amazon, the company is experiencing problems due to disruptions in the supply chain, and consumers began to return to physical stores. All this negatively affects the margins and profits of the business.. So, Amazon's earnings per share in the third quarter were 6,12 $. Analysts were waiting 8,92 $. Sales also fell below expectations: 110,8 against 111.6 billion.
"It will cost us dearly."
Amazon will further increase its costs in the fourth quarter due to labor shortages, high personnel and shipping costs. “It will cost us dearly in the short term., but our partners and customers are more important to us", - said the head of the company Andy Yassy.
The company recently announced the hiring of 150,000 temporary employees to work during the holidays.. To attract and retain employees, Amazon gives $3,000 initial bonus, and pays for college. Other large retailers like Walmart and Target offer similar bonuses in a highly competitive job market..
All costs included, as calculated in Amazon, operating income in the fourth quarter will be between 0 up to 3 billion dollars. For comparison: a year ago, operating profit for the quarter was 7 billion. According to company forecasts, revenue will grow by only 4-12%, up to 130-140 billion. Analysts expected more - $ 142 billion.
AWS bails out
After the publication of the results for the last quarter, Amazon can safely be called a non-retailer, and a service company. Service sales exceeded retail sales for the first time.
Product sales - $54.88 billion (+4%) – selling goods online- and physical stores.
Service sales - $55.94 billion (+29%) - Sales of AWS cloud services, Amazon Prime subscriptions, advertising and fees from third-party sellers.
And if you call Amazon a retailer, then unprofitable. Here's why.
North America sales - $65.56 billion (+10%).
International sales - $29.14 billion (+16%).
AWS sales - $16.11 billion (+39%).
This is Amazon's quarterly revenue by segment.. North America and International - sales in the USA and other countries of all goods and services, кроме Amazon Web Services (AWS), which the company singled out in a separate segment.
Seems, no contradictions. The main business of the company generates 85% selling, whereas AWS cloud services account for only 15% proceeds.
Now let's look at operating income., brought by each of the three segments.
North America operating income - $0.88 billion.
International operating income - $0.91 billion.
AWS operating income - $4.88 billion.
It is seen, that without AWS, the company would have reported a loss. This is not surprising., considering rising costs and low profitability of the core business. It is also difficult to show high growth rates of the company's revenue due to the high base effect.. In 2020, the company's sales increased by 38%, and shares - on 74%. This is partly why Amazon shares have been rising three times slower since the beginning of the year.&P 500: 8 against 24%.
