Amazon – International Sales Fall Amid Consumer Weakness
Amazon.com, Inc. (NASDAQ:AMZN)’s net sales rose 12% to $149.2bn in the fourth quarter, which was better than expected. Growth was entirely driven by North America and Amazon Web Services (AWS), while International sales fell 5%.
Operating profit fell to $2.7bn from $3.5bn a year ago. The decrease includes a $2.7bn charge relating to the group’s restructuring efforts, including severance costs. AWS was the only division to generate profit, which came in at $5.2bn.
Get The Full Henry Singleton Series in PDF
Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues
Q4 2022 hedge fund letters, conferences and more
Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]
Gates Capital Management’s ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Amazon said it had a record-breaking holiday season in the US.
The group expects net sales to be between $121.0bn – $126.0bn in the first quarter of 2023, with operating profit between $0 – $4.0bn.
Amazon shares fell 4.1% in after-hours trading.
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown:
“Amazon is a classic a bellwether for consumer confidence, and the slowdown in activity shines a light on the very real pull back in consumer sentiment and spending. Consumer discretionary stocks have been seeing declines in recent months as the market weighs up the likelihood of the current downturn being prolonged. While declines haven’t been as steep as feared, they could become more pronounced.
Overall, real personal consumption in the US is holding up reasonably well, but savings rates are depleting at a rapid rate. That means by the middle of the year we could see a pronounced change in behaviour which will hurt Amazon, and all other businesses selling non-essential goods.
To a large extent, this has been priced into expectations. Markets are also being steadied by the fact central banks are sticking to the script where interest rates are concerned. However, that doesn’t mean further shocks to Amazon’s valuation can be ruled out.
As usual, it’s AWS carrying the entire team with quarterly profits in excess of $5bn still not enough to stoke growth overall. Amazon’s formidable web business is largely the reason for the above average valuation, but the reality is there’s a large hurdle causing a drag on group performance.
Amazon’s retail operation grew too fast after the pandemic-boom and volumes weren’t there to meet the new infrastructure. That’s an ongoing problem, and all the cloud magic in the world can’t distract investors from that truth.”
Comments are closed.