Q3 operating loss reached 21 billion! Amazon began to significantly reduce its recruitment during the peak season

On October 27th local time , Amazon released its third -quarter performance data this year .

According to the financial report, Amazon's revenue this quarter was slightly lower than analysts' expectations, down 48% year-on-year.

At the same time, Amazon also expected fourth-quarter revenue to be far below expectations, and its stock price plummeted nearly 20 % after the news came out . FactSet data pointed out that this drop may become the worst single-day drop in Amazon's stock price in more than 16 years .

Revenue dropped sharply, only half of the same period last year

According to Amazon's financial report, its overall revenue in the third quarter of this year fell to US$2.5 billion, compared with US$4.9 billion in the third quarter of 2021 , while net income fell from US$3.2 billion in the third quarter of 2021 to US$2.9 billion .

In terms of loss-making status, the North American division (United States, Canada) had an operating loss of US$412 million, compared with an operating profit of US$880 million in the same period last year, a year-on-year decrease of 147%.

Its international divisions (UK, Germany, France, Japan and China) performed even worse, with an operating loss of US$2.466 billion, compared with an operating loss of US$911 million in the same period last year, a year-on-year increase of 171%.

Overall, Amazon's operating loss in the third quarter of this year was nearly US$2.9 billion, which is approximately RMB 21 billion at the current exchange rate .

The financial report pointed out that Amazon 's net sales in the third quarter increased by nearly 15% from the same period last year to US$127.1 billion, and US$110.8 billion in the third quarter of 2021. Excluding the US $5 billion affected by exchange rates , net sales increased by 19% compared with the third quarter of 2021.

By region, Amazon's net sales in North America in the third quarter were US$78.843 billion, up 20% from US$65.557 billion in the same period last year.

International third- quarter net sales were $27.72 billion, down 5 percent from $29.145 billion in the same period last year , and up 12 percent excluding currency changes .

Sales in North America accounted for 62% of total sales, compared with 59% in the same period last year; sales in international regions accounted for 22%, compared with 26% in the same period last year.

Looking more closely at its profit status, Amazon's net profit in the third quarter was US$2.872 billion, down 9% from the same period last year .

In comparison , Amazon 's net loss in the first quarter of this year was US$3.8 billion, and its net loss in the second quarter was US$2.028 billion, indicating that Amazon is slowly returning to profitability after three consecutive quarters of losses .

Amazon 's specific revenue for each segment in the third quarter is as follows, broken down by its own online stores, physical stores, and third-party sellers .

Net sales from online stores were $53.489 billion, up 7% from $49.942 billion in the same period last year .

Net sales from physical stores were $4.694 billion, up 10% from $4.269 billion in the same period last year .

Net sales from third-party seller services were $28.666 billion, up 18% from $24.252 billion in the same period last year .

In addition, Amazon also predicted in its financial report that its net sales in the fourth quarter of fiscal 2022 will reach between US$140 billion and US$148 billion, a year-on-year increase of 2% to 8% ; operating profit will be between US$ 0 and US$4 billion, compared with US$3.5 billion in the same period of fiscal 2021.

Amazon CFO Brian   Olsavsky pointed out that the financial reports have revealed the current determination of consumers to cut spending .

As peak season approaches, Amazon drastically reduces its staff

In the financial report, Amazon CEO Jassy said that in the past four months, Amazon Prime customers have been very positive about the two major promotions in July and October. In uncertain economic times, consumers pay more attention to such activities, and Amazon is ready for the holiday sales season in the second half of the year .

However, it can be seen from various data and performance that Amazon has also been hurt by the cold market.

According to foreign media reports, Amazon is significantly slowing its hiring pace due to slowing consumer demand and rising operating costs, mainly cutting employees in its delivery and sorting networks.

Although the financial report shows that Amazon has added tens of thousands of employees in the third quarter of 2022 in preparation for the peak season , the number of recruits has dropped sharply compared with the past two years. In the third quarter of 2020, due to crazy expansion, Amazon soared by 248,500 employees , and added 133,000 employees in the third quarter of 2021 , while only 21,000 employees were added in the same period this year .

Amazon Chief Financial Officer Brian Olsavsky said the company is preparing for "a period of potentially slower growth" due to foreign exchange headwinds, global inflation and increased energy costs.

To mitigate the impact of slowing sales, Amazon is "taking actions to tighten its belt," including suspending some hiring plans and shutting down some products and services. Not only that, Amazon has become more cautious in hiring because wages for some positions cannot keep up with price inflation, especially for technical employees.

In addition to facing the negative market situation, Amazon currently has to deal with competitive pressure from e-commerce platforms around the world and guard against losing its market share.

According to the latest data from Finbold , in 2022, the online user traffic of Alibaba International Station in the United States soared, and it jumped to 4 times that of Amazon's traffic , reaching 98.45%. As of now, the growth rate of Amazon 's online traffic in the United States is only 28.12% .

Finbold data shows that, as of now, among the e-commerce platforms with the fastest online traffic growth in the United States in 2022 , Alibaba International Station ranks third in overall growth rate, and Amazon ranks eighth. S HEIN has the highest growth rate of 183.45% . In addition, Etsy, AliExpress and Walmart have growth rates of 26.16%, 13.51% and 11.65% respectively .

Amazon 's online business has continued to decline this year . However, despite the slowdown, Amazon is still the leading e-commerce platform in the United States and still has the upper hand in terms of growth, profitability and valuation.

At the earnings conference, Jassy said that Amazon has made steady progress in reducing the cost of its store fulfillment network , and the company is methodically implementing a series of initiatives to bring a stronger cost structure to its business development. The macroeconomic environment will balance and streamline various investments , but will not affect the company 's key long-term strategy . Jassy also expressed confidence in sales during the peak season.

However, in recent days, many sellers have been hit by Amazon’s cutbacks. Not only has the cuts increased significantly compared to the past, but some sellers have even reported that the cuts have been happening for several days in a row, and the first thing they do when they wake up in the past few days is to check how much Amazon’s inventory has been cut.

According to Yien.com , the storage capacity may be reduced by as little as one-tenth , or as much as half, or even all the way to the red.

Why do sellers drastically reduce their inventory capacity on a large scale before the peak season?

Although Amazon officially responded that the sellers affected were those who failed to meet the IPI assessment standards , some sellers speculated that Amazon may want to clear out its squeezed goods during the peak season, so it controls the sellers' product quantities; others believe that it may be because of the labor shortage caused by the local strike in the United States , or that Amazon has a new warehouse plan .

In short, some sellers joked that this year's reduction in storage capacity has become a new sign of the peak season. However, for this year's year-end peak season , sellers are also conservative, saying that it is a foolish dream to turn things around by relying on the peak season .

Amazon

Third quarter

Financial Report