Amazon braces itself for tougher business climate amid Trump trade war
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Amazon posted a decent first quarter but said operating profit in the current period would be weaker than Wall Street anticipated.
PHOTO: REUTERS
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SEATTLE – Amazon.com said it’s bracing itself for a tougher business climate in the coming months, echoing concerns from a range of companies that tariffs and related economic turmoil could crimp consumer spending.
When it reported results on May 1, the world’s largest online retailer posted a decent first quarter but said operating profit in the current period would be weaker than Wall Street anticipated.
Amazon projected operating profit of US$13 billion (S$17 billion) to US$17.5 billion, compared with an average estimate of US$17.8 billion. Sales will be US$159 billion to US$164 billion in the April to June quarter, the company said in a statement. Analysts, on average, expected US$161.4 billion.
In issuing its forecast, Amazon said results may be “materially affected by many factors”, such as “tariff and trade policies”, currency fluctuations and “recessionary fears”.
“Obviously, none of us knows exactly where tariffs will settle or when,” chief executive officer Andy Jassy said on a conference call after the results were released. “We haven’t seen any attenuation of demand yet. To some extent, we’ve seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact.”
First-quarter sales increased 9 per cent to US$155.7 billion, compared with the average estimate of US$155.2 billion. Operating income was US$18.4 billion in the period ended March 31. Analysts projected US$17.5 billion.
The company’s reputation for competitive prices and a broad base of suppliers could insulate it if shoppers become more deal-focused. But a pullback by the independent Chinese sellers who help stock Amazon’s warehouses could hit the logistics and high-margin advertising businesses.
There are already signs of a slowdown. Revenue from third-party seller services increased 6 per cent to US$36.5 billion in the first quarter, falling short of analysts’ average estimate. Advertising, which has been the company’s fastest-growing unit, gained 18 per cent to US$13.9 billion, in line with estimates.
“Amazon advertising remains vulnerable to cuts in spending from the many small and mid-sized sellers who will be most squeezed by tariffs on goods from China, and revenue growth from the third party marketplace has slowed significantly from the levels of just a few quarters ago,” said Ms Sky Canaves, an analyst at Emarketer.
The shares declined about 3 per cent in extended trading on May 1. The shares have fallen about 13 per cent this year as Wall Street weighed the impact of President Donald Trump’s tariffs on a retail operation that sources much of its goods from China.
The White House lambasted Amazon earlier this week following a news report that the company was considering displaying the cost of tariffs to shoppers. Amazon said it was considering – and has no plans to implement – disclosing the cost of imports for Haul, its Temu-like storefront that features cheap goods shipped directly from Chinese sellers. BLOOMBERG
