Amazon records first unprofitable quarter since 2015, losing $3.8 billion

Amazon has posted its first unprofitable quarter since 2015, losing $3.8 billion and slashing its forecast sending shares tumbling 10%.

The news is further indication that lockdown-lifting has ended the online shopping sales frenzy that was fuelled by the pandemic.

Amazon’s expenses have swelled over the past 12 months as a result of its investment in electric automobile company Rivian and its generous wage and bonus packages in order to attract workers amid the great resignation.

A fulfilment centre in New York City voted to create Amazon’s first US union, a result the retailer is contesting.

Hiked fuel costs have meant that delivery is costing more for Amazon, on top of the fact consumers have less disposable income.

This could mean that the rise of the price of Amazon’s Prime subscription service may not be enough to prop up the ecommerce giant’s profits.

Amazon Fresh store
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It expects to lose as much as $1 billion in operating income this quarter, or make as much as $3 billion. Down from an operating profit of $7.7 billion in the same period last year.

“This was a tough quarter for Amazon with trends across every key area of the business heading in the wrong direction and a weak outlook for Q2,” Insider Intelligence principal analyst Andrew Lipsman told Reuters.

Despite the mainly negative outlook in its quarterly report, its web service division AWS increased revenue 37% to $18.4 billion, slightly ahead of analysts’ estimates.

Company CEO Andy Jassy said the company has finally met its warehouse staffing and capacity needs, but it still has work to do in improving productivity.

“This may take some time, particularly as we work through ongoing inflationary and supply chain pressures, he said in a press release.

“We see encouraging progress on a number of customer experience dimensions, including delivery speed performance as we’re now approaching levels not seen since the months immediately preceding the pandemic in early 2020.”

Amazon’s bricks-and-mortar division results have been mixed, after it said it planned to close all of its 68 of its bookstores, pop-ups and other home goods shops, as it switched its focus to its grocery arm, in March.

The company’s physical store sales grew 17% to $4.6 billion. Projected net sales will be between $116 billion and $121 billion for the second quarter. Analysts were expecting $125.5 billion, according to IBES data from Refinitiv.

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