New Amazon boss contends with sales slowdown as pandemic impact fades

Amazon’s new boss is facing a sales slowdown as the breakneck pace of expansion fuelled by stay-at-home shopping eases.

Andy Jassy, who took over from founder Jeff Bezos earlier this month, saw the company’s shares fall 7% in after-hours trading as his first set of results as chief executive revealed revenues short of Wall Street expectations.

Second quarter sales at the online retail giant rose 27% compared with a year ago to $113.1bn (£81bn) while profits rose 48% to $7.8bn (£5.6bn).

Andy Jassy, CEO Amazon Web Services, speaks at the WSJD Live conference in Laguna Beach, California, U.S., October 25, 2016.
Image:Andy Jassy has taken over as chief executive

But the sales figure missed analysts’ estimates of around $115bn (£82bn) and growth was down from 44% in the first quarter.

A forecast for the current July-September period pencilled in revenue growth of no more than 16%.

Amazon also pointed to a profit range which will be lower than the third quarter a year ago.

The company’s finance chief Brian Olsavsky said it faced tough comparisons with 2020 when many consumers were stuck at home and reliant on e-commerce.

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In the US and Europe, people were now out and about “doing other things besides shopping,” he said, adding that he expects the lower pace of sales growth to continue over the next few quarters.

It comes as new boss Mr Jassy tries to get to grips with a sprawling empire that now encompasses a cloud computing division, store chain network Whole Foods, a new healthcare business, and a film and TV arm that is in the process of buying MGM studios – on top of the core retail operation.

Jeff Bezos. Pic: AP
Image:Founder Jeff Bezos handed over to Mr Jassy earlier this month Pic: AP

During the pandemic, Amazon ramped up its growth, building the number of members of its Prime subscription service – which offers quicker deliveries as well as video streaming – to more than 200 million and recruiting over 500,000 workers to keep up with surging demand.

In North America, its biggest market, net sales climbed by 43% in the second quarter of last year as lockdowns first took their toll.

A year later, sales were still rising strongly, but by 22% – half the pace.

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Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Amazon is increasingly bumping up against the law of large numbers – particularly in US retail.

“When you’re only selling $1,000 (£716) of product a year, boosting sales by 40% is easy.

“When your annualised sales reach $400bn (£286bn), finding an extra $160bn (£114bn) of sales is pretty difficult.”

Amazon results come at the end of a busy period of earnings statements that have revealed contrasting fortunes for America’s tech giants as pandemic restrictions draw to an end.

The likes of Google owner Alphabet and Twitter are enjoying the benefits of reopening as advertisers pay for exposure on their platforms, seeking to cash in on pent-up demand.

But elsewhere, Netflix has seen subscriber growth slow after last year’s record additions.

Mark Gibson

Graduates in Northwestern University, Evanston, Illinois 1990. Move to Los Angeles California in 2004. Specialized in Internet journalism.

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