Amazon delivered a disappointing quarterly result and released a lower-than-expected performance outlook on Thursday, citing higher costs of operating distribution and logistics centers. The company’s shares tumbled 10% on extended trading. Amazon projected net income of between $116 billion and $121 billion for the second quarter. Analysts had expected 125.48 billion, according to Refinitiv data.
After posting increased sales during the most critical phase of the Covid-19 pandemic, Amazon’s prospects have dimmed. The company’s expenses have increased as it is paying higher wages to attract workers during a time of labor shortage in the United States.
In addition, higher fuel prices are reducing consumers’ disposable income, while making it more expensive for Amazon to deliver products.
At the end of the first quarter, the company raised the price of its fast-delivery club Prime by 17% in the United States, which has already gained more than 200 million subscribers. In addition, the company as of this Thursday imposed an average adjustment of 5% related to fuel inflation costs for sellers of its platform in the US.
The forecast for the second quarter shows that these actions may not be enough. The company expects operating income of $3 billion for the current quarter, down from $7.7 billion a year earlier.
“This has been a difficult quarter for Amazon, with trends in every major area of the business going in the wrong direction and a poor outlook for the second quarter,” said Insider Intelligence analyst Andrew Lipsman.
Andy Jassy, Amazon’s chief executive, said the company has finally managed to fill its staffing and capacity needs and distribution centers, but it still has work to do to improve productivity.
“This could take some time, mainly because we work with inflationary and supply chain pressures,” said the executive.
In North America, the company’s biggest market, sales rose 8% while operating expenses rose 16% to $71 billion, resulting in an operating loss of $1.6 billion for the unit for the quarter.
The division Jassy ran before becoming the company’s chief executive last year, Amazon Web Services, has traditionally been a strength of the company. The unit increased revenue by 37% to $18.4 billion, slightly above analyst estimates.
