Amazon.com Inc. said it will be a tougher business environment in the coming months, echoing concerns among a number of companies whose concerns and associated economic turmoil could depress consumer spending.
When the results were reported on Thursday, the world's largest online retailer released a good first quarter, but said operating profits in the current period will be weaker than Wall Street expected.
Amazon expects operating profits of $13 billion to $17.5 billion, compared with an average estimate of $17.8 billion. Sales will be between $159 billion and $164 billion in the period to June, the company said in a statement. On average, analysts are projecting $161.4 billion.
Amazon said in its forecast that the results could be “affected by many factors” such as “tariffs and trade policies,” currency volatility and “recession fears.” Amazon did not mention tariffs in its first quarter forecast in early February.
“One of us obviously doesn't know where the tariffs will be addressed or when they will be lowered,” CEO Andy Jassy said on a call after the release of the results. “We haven't seen any decay of demand yet. To some extent, we've seen some categories of purchases increase some that could indicate stocks before any potential tariff impacts.”
Sales rose 9% in the first quarter to $155.7 million, while the average estimate was $155.2 billion. Operating income was US$18.4 billion for the period ending March 31. Analysts expect $17.5 billion.
If shoppers become more focused, the company is known for its competitive prices and a wide range of suppliers. But the callback from independent Chinese sellers could help stock Amazon’s warehouses, which could hit logistics and high-margin advertising businesses.
There are already signs of slowing down. Revenue from third-party seller services rose 6% to $36.5 billion in the first quarter, without an average analyst estimate. Advertising is estimated to be the company's fastest growing unit, up 18% to $13.9 billion.
“Amazon advertising is still vulnerable to spending cuts from many small and medium-sized sellers who will be subject to the biggest ratings of tariffs on Chinese goods, while revenue growth in third-party markets has slowed significantly from levels a few quarters ago,” said Sky Canaves, an analyst at Emarketer.
The stock's extended trading volume fell about 3% after the New York closing price was $190.20. Stocks have fallen about 13% this year as Wall Street weighs President Donald Trump’s impact on retail business, with the impact of purchasing most of its goods from China.
Amazon Web Services, the largest seller of rental computing power, reported first-quarter sales of 17% to $29.3 billion, in line with analyst estimates. This is the slowest growth of the unit in a year, in stark contrast to Microsoft Corp.
Amazon’s biggest cloud competitor released a blowout quarter this week, reporting that customer demand for cloud services remains stable despite waste of tariffs and economic turmoil.
DA Davidson & Co. Amazon investors “may be disappointed with margins and margin guidance, which could draw attention to Amazon's cost of absorbing tariffs. While AWS is almost in line with expectations, this is a growth on the tail of Microsoft Azure Azure, exceeding expectations and growing the business, which can grow almost quickly.”
The White House slammed Amazon earlier this week after a news report said the company was considering showing shoppers the fees for tariffs. Amazon said it is considering (and has no plans to implement) the disclosure of import costs for shipping, i.e. its Temu-like storefronts that are cheap items shipped directly from Chinese sellers.
Chief Financial Officer Brian Olsavsky said Amazon is planning “various outcomes” about trade and the overall economy.
“We have taken many actions to protect the customer experience,” Olsavski said during the call. “We are doing everything we can to keep the customer’s prices in the economic sense.”
With the assistance of Spencer Soper.
This article was generated from the Automation News Agency feed without the text being modified.
