Amazon reports its first unprofitable year since 2014

[Hydrogen]

After a long run of surging profits from pandemic-era shopping sprees, Amazon is feeling the hangover. The retail and tech giant is reporting its first unprofitable year since 2014.

Amazon lost $2.7 billion last year, the company said on Thursday. This was despite holiday-season sales growing 9%. Amazon's shares fell in after hours trading.

By far, the biggest culprit for Amazon's losses over the year was the company's hefty investment in the electric automaker Rivian whose value plummeted last year and ate into Amazon's bottom line.

Amazon had taken a 20% stake in Rivian and has begun rolling out the carmaker's electric delivery vans. Rivian wanted to replicate Tesla's success and held one of the largest initial public offerings in U.S. history. But last year, the exuberance faded, the carmaker made pricing missteps and it fell short of growth targets. Its stock price dropped 82%.

For Amazon, the loss on its investment comes right when it contends with the need to recalibrate after a pandemic-era upsurge.

During the pandemic, the appetite for online shopping seemed to promise exponential growth, and many believed the habit changes could be permanent. Amazon couldn't hire and built warehouses fast enough; its profits doubled and kept growing. But then people returned to physical stores, switched from cocooning to travel and outings, and eventually got more hesitant to spend as inflation rose.

Amazon began reconsidering its warehouse expansion plans. Industry reports tracked cancellations, closures and delays. Andy Jassy, in a rare Amazon CEO appearance on a quarterly call with investors, said his top priority was cutting costs in the company's operations.

"It's important to remember that over the last few years we took a fulfillment-center footprint that we built over 25 years and doubled it in just a couple of years," he said. "We at the same time built out a transportation network, for last mile, roughly the size of UPS. Just to get those functional, it took everything we had."

Last month, Amazon announced it expected to cut 18,000 jobs, or about 5% of the corporate workforce. Jassy, in a blog post, referenced "the uncertain economy" and the company's pandemic-era hiring spree.

At the peak, in late 2021-early 2022, Amazon employed more than 1.6 million part-time and full-time workers globally. Thursday's financial report shows that number is now down to 1.5 million.

In October, the company — the second-largest private employer in the U.S. — raised the average starting pay for U.S. warehouse and delivery workers to $19 an hour from $18 to stay competitive.

Now, Amazon is also seeing growth slow down also in its biggest money-maker, the cloud computing business — as companies scale back in the face of high inflation and interest rates.

When reporters asked about the slowdown at Amazon Web Services Thursday, Chief Financial Officer Brian Olsavsky said: "We realize everyone's trying to cut their budgets – we are in our main Amazon business... We do expect to see some slower growth rates for the next few quarters."

Still, Amazon continues to invest in new ventures. The company is working to close its $4 billion deal to buy One Medical, a chain of primary-care clinics. And it launched a $5 subscription service for generic prescription medication for its paying Prime members, hoping to draw more people into the program.

Separately, the company faces a protracted fight against an upstart unionization push. Amazon last month lost its bid to overturn the first-ever union win at a Staten Island warehouse. Federal labor officials ordered the company to begin bargaining with the Amazon Labor Union. But the matter is likely to reach courts.

In recent weeks, Amazon received a series of citations for safety violations from federal inspectors at the Occupational Safety and Health Administration. This is for six warehouses in Colorado, Florida, Idaho, Illinois and New York.

OSHA officials found Amazon warehouse workers at high risk of lower back and other injuries from twisting, bending and lifting that they perform as much as nine times per minute. The company was expected to appeal, and a spokesperson said the allegations didn't "reflect the reality of safety at our sites."

https://www.npr.org/2023/02/02/1153562994/amazon-reports-its-first-unprofitable-year-since-2014

....

• Lost $$ on rivian EV investment
• Doubled fulfillment center overhead on their warehouse expansion over roughly the past 2 years
• Demand for amazon web services declined
• Amazon is buying one medical for $4 billion

I had no idea amazon owned a large percentage of rivian. For those who have never heard of rivian EV trucks, they could be head and shoulders above the tesla cybertruck in terms of features and design. There have many amazing features and have to be hands down the best EV truck on the market. The main issue they face is being built as luxury vehicles priced below their material value and cost of construction.

Could amazon recover and be a buy?

I'm not certain their growth potential under current circumstances could translate to a worthwhile number of percentage points.

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[avikz]

It's unfortunate that a giant like Amazon had to face financial losses. So it's probably the best time to buy Amazon stocks. It's already down by 35% in the last one year and trading at a very attractive level. If someone wants to play long term, probably this is the time to buy.

Amazon's business is robust but due to the ongoing recession, they are seeing less demand for their cloud services. Also there are multiple competitors available in the market which wasn't the case couple of years back.

My personal feelings is Amazon will come back for sure, but just needs to have patience. Corporates make wrong investment decisions too just like any retail investors..

[mk4]

It's unfortunate that a giant like Amazon had to face financial losses. So it's probably the best time to buy Amazon stocks. It's already down by 35% in the last one year and trading at a very attractive level. If someone wants to play long term, probably this is the time to buy.

It's very unrealistic to expect a company to be making great financial results every quarter forever. Speedbumps are to be expected from time to time, even for massive companies such as Amazon.

[The Sceptical Chymist]

Could amazon recover and be a buy?

Sure, they're the biggest (or one of the biggest) retailers out there, and I don't think they're going to be in danger of bankruptcy in our lifetimes, like some others have been (Sears, JC Penny, Circuit City, etc.).  They've also spent most of the time since their inception being unprofitable if I'm not mistaken, and yet the stock has always been a Wall Street darling.

I used to own some shares in Amazon, but I sold them a while back because I had to.  Too bad I wasn't able to hang onto them, because I do think they're going to improve profits--and even if it takes them a while, their stock likely won't fall out of favor.

[Leviathan.007]

It's unfortunate that a giant like Amazon had to face financial losses. So it's probably the best time to buy Amazon stocks. It's already down by 35% in the last one year and trading at a very attractive level. If someone wants to play long term, probably this is the time to buy.

Amazon's business is robust but due to the ongoing recession, they are seeing less demand for their cloud services. Also there are multiple competitors available in the market which wasn't the case couple of years back.

My personal feelings is Amazon will come back for sure, but just needs to have patience. Corporates make wrong investment decisions too just like any retail investors..

I'm not going to judge the other companies but from what we know amazon is again the company and they're actually the most famous e-shop people from all over the world use their services that's why I was really surprised when I saw this news saying amazing was unprofitable this year and had a hard time because if this happened for a company like this then I think others are having even worst situation which not good and his show us how the demand os buying and selling products decreased in all over the world which indicated the bad economic situation of the world.

[Synchronice]

OSHA officials found Amazon warehouse workers at high risk of lower back and other injuries from twisting, bending and lifting that they perform as much as nine times per minute. The company was expected to appeal, and a spokesperson said the allegations didn't "reflect the reality of safety at our sites."

Of course warehouse job is very tough and it will affect your lower back and spine. For the most part, workers have to take heavy items from table to trailer and I believe it's more than 9 parcel per minute. I don't think that working conditions will be better in US than in Germany. You'll never see a German person as a delivery guy in Amazon or as a warehouse worker because these jobs are very tough and Amazon uses the advantage of poor immigrants who have language barrier, don't know their  rights, so on and makes them work more than they should in more tough environment than DHL. So, I would say that Amazon is a shady company but at the same time I can't totally blame them because people want everything to be as cheap as possible, they like the idea of prime delivery, cheap or free delivery, this can't be done without exploiting of workers. It's bad of course but I think that society enjoys it and since if it's cheap, it's okay for people if some workers are oppressed.

[arallmuus]

They've also spent most of the time since their inception being unprofitable if I'm not mistaken, and yet the stock has always been a Wall Street darling.

Pretty good statement there and yeah this is a fact, Most of these top companies never really brag about their company when they are making tons of money out of our pockets annually but it seems like always a huge issue when they are not while in fact, one or two bad year wont really harm their business as they have been making tons of money so far

[dothebeats]

Rivian trucks were great when launched, but as soon as it hit the markst a lot of users complained on a lot of things, most especially build quality. Some trucks were recalled, and perhaps that hurt the marketing of Rivian very hard because on the surface, it looks and feels better than Teslas, but the reviews and reactions from actual buyers say otherwise. Also, I never thought AWS usage declined over the years. Here I thought many bsuinesses and organizations will utilize it, but boy I was wrong. Amazon as a company, is profitable because of its stocks, but needless to say there are tons of their subsidiaries and investments that aren't really cut out to absorb the blows of their competitors.

[Johnyz]

They've also spent most of the time since their inception being unprofitable if I'm not mistaken, and yet the stock has always been a Wall Street darling.

Pretty good statement there and yeah this is a fact, Most of these top companies never really brag about their company when they are making tons of money out of our pockets annually but it seems like always a huge issue when they are not while in fact, one or two bad year wont really harm their business as they have been making tons of money so far

They incurred losses which is something that needs to be addressed if you’re a business man, probably either the economy is not that good or your business is slowly losing the competition. Well, they are still a big company and I believe they can still have the potential to rise, its just that maybe they are not used to a losses anymore. This can be a result of so many factors, investing into something might not that be effective for them.

[Husires]

Why did Amazon want to diversify its investments in this way? I understand that Jeff Bezos would do this, but for the company to do it directly, it seems strange, and yet blaming Rivian is not a good thing.
The past year was disastrous for everyone, and I believe that the luxury of buying online has not become what it was in previous years, so it is natural for profits to decline.

If the downward curve continues, then Amazon's golden age is over.

[Fortify]

• Lost $$ on rivian EV investment
• Doubled fulfillment center overhead on their warehouse expansion over roughly the past 2 years
• Demand for amazon web services declined
• Amazon is buying one medical for $4 billion

I had no idea amazon owned a large percentage of rivian. For those who have never heard of rivian EV trucks, they could be head and shoulders above the tesla cybertruck in terms of features and design. There have many amazing features and have to be hands down the best EV truck on the market. The main issue they face is being built as luxury vehicles priced below their material value and cost of construction.

Could amazon recover and be a buy?

I'm not certain their growth potential under current circumstances could translate to a worthwhile number of percentage points.

Rivian was a one off cost that has now been written off, sometimes these new projects can fail but at least they tried. They definitely did over expand during Covid but as long as they are sensible with trimming operations back, there is a lot of slack and savings to be made in future if they continue their cost cutting plans. It seems like a step into the medical sector might potentially be a very lucrative and perfect fit considering their extensive logistics chain that can move these high value items to customers. While I am not a fan of Amazon as an end customer, after seeing them crush many smaller competitors due to predatory pricing, I cannot help but think the Amazon share price is looking cheap right now.

[adaseb]

Well most people I know they basically went back to offline ordering. Many just go to a store now instead of ordering online. The Amazon driver when I asked how busy they were, they said it’s much slower now compared to last year.

However it’s still the largest marketplace. They just had a big boost due to Covid and had to hire many people and had to purchase large warehouses. Now that Covid is over they need to scale back. Plus with the recession looming many are saving money instead of buying items they might not need.

[slapper]

Well most people I know they basically went back to offline ordering. Many just go to a store now instead of ordering online. The Amazon driver when I asked how busy they were, they said it’s much slower now compared to last year.

However it’s still the largest marketplace. They just had a big boost due to Covid and had to hire many people and had to purchase large warehouses. Now that Covid is over they need to scale back. Plus with the recession looming many are saving money instead of buying items they might not need.

After the CoVD-19 outbreak subsides, shoppers will likely return to stores. Amazon drivers should state they're busier than a year ago. Despite returning to brick-and-mortar locations, Amazon is the biggest online retailer. They hired many workers and built huge constructions throughout the pandemic. After the pandemic, their business may need to shift. People are spending less and buying what they need because they expect a recession. It's remarkable how outside pressures effect business and purchase patterns. Since the pandemic and crisis, have your consumers changed their buying habits?

[Gyfts]

There's two American car companies that haven't gone bankrupt. Ford and Tesla. Ironically enough Ford is an investor in Rivian. It shouldn't come as a surprise that Rivian is hemorrhaging money and Amazon having sunk its investment. I wouldn't expect every Amazon investment to be a hit. EV's seem like a volatile investment but of course Amazon was thinking they could incorporate Rivian vehicles into their delivery vehicle fleet.

Why did Amazon want to diversify its investments in this way? I understand that Jeff Bezos would do this, but for the company to do it directly, it seems strange, and yet blaming Rivian is not a good thing.
The past year was disastrous for everyone, and I believe that the luxury of buying online has not become what it was in previous years, so it is natural for profits to decline.

If the downward curve continues, then Amazon's golden age is over.

Amazon is diversifying into businesses that can accentuate their primary e-commerce platform. Rivian uses EVs, and of course Amazon is a massive shipping company that relies on gas powered vehicles Amazon has already stated they plan to switch their delivery vehicles to EV's. The pharmacy company they invested in is going to be incorporated and marketed to Amazon prime users.

[Smartprofit]

Amazon's losses, in my opinion, are quite predictable ... This state of affairs could have been predicted in advance. 

It is very dangerous for a big company like Amazon to show such dynamic growth as it did during the era of the Covid-19 coronavirus pandemic.  This destabilizes all business processes of the company. 

Amazon now has an excess number of employees (including senior and middle managers).  In such a situation, the owners of the company become hostages to the ambitions of the top management of the company. 

The leaders of the company, wanting to prove themselves from the best side, initiate new projects, promising fabulous profits to the owners. 

However, such adventures only lead to huge losses.

[DaveF]

And....it's also a bit of a paper loss.
Some things could have been amortized over a long period, but they took the hit here and now.
Sometimes it works sometimes it does not. A lot of the warehouse build costs were fully written down in 2022 along with some other things.

The cloud expansion has slowed down a bit too, and those data centers are not cheap. But the costs 'incurred' in 2022 were for a large chunk of some builds that they could have written off over years.

Dave's prediction. 2023 will be a meh year again for them as they write off more stuff and then an explosion of profit after that as they don't have the paper losses anymore.

Not to say 2022 was NOT a bad year for them, they defiantly did not do well but they made it look worse on paper then they had to.

-Dave

[Flexystar]

Why not, they are expanding the physical warehouses everywhere in the need of increasing the prime services and also cut down the delivery times as if you can press order and the delivery guy would be standing next to you. They are slowly forgetting that they are e-commerce businesses and not something retail OTC with store nearby every customer they are fulfilling the needs. Due to this they are heavily investing the money. Once the contracts are made they can not be altered with the physical locations until it ends or they are penalized for the same. This is why they are now destroying the jobs of corporates and showing the loses in turn to it. It's entirely wrong and they should not be changing their actual business nature to stay in the competition.

[o48o]

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Could amazon recover and be a buy?
-cut-

I don't know if there's a serious competition for amazon in anywhere. Alibaba might be one in the future but i doubt it. People have issues with chinese products.
So if it gets to grow unchallenged, it can totally destroy anyone who is trying to get into that market.

Unless there's a totally new kind of disruptor coming along, or amazon gets sued to the ground, staff goes to total strike and that's backed by everyone or something like that.
I can't see that amazon would crash. I am not sure how big it can grow but ahead of Apple marketcap for sure.

[Volgastallion]

I really dislike this shit "news" writter by the press and sometimes written also by economists.

They always think you have to be profitable year by year and always in an up arrow. Man you know that its imposible like in life you have upside downs.

So if you invest a ton of money in X project and you know that project can make money after 3 years, obviusly your balance sheet can be not so profitable in that 3 years, and after that when the business its marching on wheels BUM mega profit.

And the same idiot who say the mention below, its gonna say something like "the smart mind behind the market strategy of Amazon".
With some highlighted titles like "trust the process" Amazon was spending so much money on this for 3 year until now..... bla bla bla.

And all the idiots making paic sell and panic buy, and after go and read some Warren Buffet thing to no make any similar to Warren Buffet.

"Buy the rumor, sell the news" in one of his aceptions.

[Sithara007]

And....it's also a bit of a paper loss.
~~~

Oh.. OK.. so that is the case here.

Amazon has an absolute monopoly in terms of e-commerce, and therefore they are not going to care even if the profits go down for a year or two. I am 100% sure that the so called loss is a tactic from them to lower the tax bill. It is their competitors who are going through losses now, as a result of monopolistic policies from Amazon. The misuse of monopoly by Amazon has made the lives of their competitors miserable and many of them had to shut down. Fortunately here in India, we have a strong competitor (Flipkart) who just refuses to lose to Amazon.