Amazon reported its first quarterly net loss since 2015: $3.8 billion in the latest quarter, after posting a profit of $8.1 billion in the same period last year.
It’s financial reporting season, and here’s a surprise: Amazon posted its first quarterly loss since 2015. As the US group announced on April 28, 2022 after markets closed in New York, the loss was amounted to 3.8 billion US dollars (3.43 billion euros). A year ago, over the same period, Amazon recorded $8.1 billion in profits.
What happened ?
We are not talking about pebbles in the shoe here, the Amazon model suffers from several ailments. First, Amazon recognizes a $7.6 billion impairment on its equity investment in Rivian Automotive, one of Tesla’s rivals. Due to multiple delays, Rivian shares lost more than half their value in the first quarter of 2022, which forced Amazon to significantly reduce its stake in the electric car startup.
But Amazon’s losses cannot be explained solely by this depreciation. The slowdown in online spending is real and widespread. After several months of euphoria in the online sales market since the start of the Covid-19 pandemic, March 2022 is the first month to show a drop in online sales globally. Amazon does not talk about it directly, but Mastercard has confirmed it by posting some data related to the monitoring of expenses made on the credit card payment network.
While it is clear that Amazon profited from the crisis during the Covid-19 pandemic, as people in lockdown turned to the internet in droves to buy what they needed, this growth has now slowed, as those vaccinated feel more comfortable going out. In addition, the war in Ukraine has led to significant increases in energy and therefore transport.
Amazon is facing inflation pressure, supply chain issues and labor shortages. Despite the increase in the price of the Prime subscription in the United States, as well as the 5% increase in the fees charged to third-party sellers who use its shipping and storage services, it was not enough to avoid the high losses of the last quarter.
Add to this context the fact that the company is facing a growing push for unionization in the United States. As a reminder, the employees voted in favor of their representation by an independent union, against which Amazon fought hard, which has always succeeded so far in nipping union inclinations in the bud. Amazon believes the small group of trade unionists “threatened” its warehouse workers to force them to vote in favor of forming a union. A second union election is underway at a warehouse in Staten Island, New York.
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