Amazon began its 2022 fiscal year with a surge in sales in the first quarter as strong growth in its services business and a double-digit gain in its physical stores overcame a decline in basic online retail sales.
Ultimately, the online retail giant posted a quarterly net loss of almost $4 billion, due to an investment valuation loss of more than $7 billion.
For the quarter ended March 31, net sales rose 7.3% to $116.44 billion from $108.52 billion a year earlier, Seattle-based Amazon reported yesterday after the close. of the market. Excluding the impact of exchange rate fluctuations, overall sales increased 9% year over year.
Online store sales totaled $51.13 billion, down 3.3% from $52.9 billion in the first quarter of fiscal 2021. The decline is 1% excluding currency. Sequentially, online store sales fell 22.3% between the fourth quarter of 2021 and the first quarter of 2022.
Sales at Amazon’s brick-and-mortar stores, which include Whole Foods Market, rose 17.1% (about 16% excluding FX) to $4.59 billion in the first quarter from $3.92 billion last quarter. last year. The increase is based on year-over-year gains of 16.6% in the fourth quarter of 2021, 13% in the third quarter and 11% in the second trimesterwhich comes after a Decrease of 15.5% in the first quarter of 2021. On a sequential basis, physical store sales fell nearly 2.1% in the first quarter of 2022 after three consecutive quarter-over-quarter increases.
Amazon’s physical sales come primarily from the Whole Foods unit and exclude online orders made through the company’s physical brands, such as Prime delivery and pickup at Whole Foods stores. Currently, Amazon’s physical stores in the United States include 515 Whole Foods Markets, 29 Amazon Fresh grocery stores, and 26 Amazon Go convenience stores.
In early March, Amazon announced plans to close all of its bookstores, pop-up retail sites and stores selling toys and home goods in the US and UK. When the company reported fourth quarter 2021 results in early February, these U.S. locations included 24 Amazon Books stores, 33 Amazon 4-star outlets, and nine Amazon Pop-Up locations.
Amazon, meanwhile, continued to develop its other physical banners. The company said it opened eight new Amazon Fresh grocery stores in the first quarter and now has 46 in total in the US and UK. This week a new larger Amazon Go store format for suburban areas opened in Mill Creek, Washington, with more convenience foods and Just Walk Out technology that allows customers to skip the line. Amazon plans to expand the larger Go format to the Los Angeles area in the coming months.
The first quarter also saw Amazon introduce the Just Walk Out cashierless checkout to Whole Foods stores in washington d.c.and Sherman Oaks, California. Amazon noted that Just Walk Out is also rolling out at other third-party locations, including travel retailer WHSmith at New York’s LaGuardia Airport; UBS Arena in Long Island, NY; and Minute Maid Park in Houston. The company added that a food and beverage store featuring Just Walk Out palm-scan ID technology and Amazon One is set to open soon at Seattle’s T-Mobile Park.
“Over the past several months, Amazon has made significant investments in retail innovations designed to reduce friction with customers, such as Just Walk Out Technologies, which they license to third-party retailers,” said said Deren Baker, CEO of e-commerce intelligence firm Edge. by Ascential, said in an email. “Retail as a service is the next big market opportunity for Amazon. With labor and operating costs rising across the retail industry, Amazon is well placed to offer its technological and logistical infrastructure to third parties.
In January, Amazon also announced plans to opens its very first physical clothing store, called Amazon Style. The first location is set to open later this year at The Americana at Brand, a retail, dining, entertainment and residential development in Glendale, California.
Among Amazon’s other business units, sales climbed 7% in third-party seller services, 37% in Amazon Web Services (AWS), 23% in advertising services, 11% in subscription and 26% in other services for the first quarter.
“Global net sales in the first quarter were $116.4 billion, a 9% year-over-year increase excluding the impact of currency exchange rates. This is at the upper end of our guidance range of $112 billion to $117 billion. Our compound annual growth since before the pandemic is 25%, a higher growth rate than what we were seeing before the pandemic,” Amazon chief financial officer Brian Olsavsky told analysts on a conference call late Thursday. .
“Our Prime members continue to be a key driver of growth. Prime members have significantly increased their spending since the start of the pandemic, and we continue to see consistently high member renewal rates,” Olsavsky said. We also added millions of additional new Prime members during the quarter. Over the past two years, we’ve seen increased use of Prime benefits by Prime members and greater reliance on Amazon for shopping and entertainment.
On the earnings side, Amazon reported a net loss of $3.84 billion in the first quarter of fiscal 2022, or $7.56 per diluted share, compared to net income of $8.11 billion, or 16 $.09 per diluted share, a year ago. The company noted that the loss includes a $7.6 billion pretax valuation loss of non-operating expenses from a common stock investment in Rivian Automotive. “You may recall that we made a $12 billion gain on Rivian in the fourth quarter,” Olsavsky said on the analyst call.
Analysts had on average forecast first-quarter 2022 adjusted earnings per share of $8.36, with estimates ranging from $5.96 to $11.60, according to Refinitiv.
“The pandemic and subsequent war in Ukraine has brought about unusual growth and challenges,” Amazon CEO Andy Jassy said in a statement. “With AWS growing 34% annually over the past two years and 37% year-over-year in the first quarter, AWS has played a critical role in helping businesses weather the pandemic and move more of their workloads to the cloud. Our consumer business has grown 23% annually over the past two years, with extraordinary growth in 2020 of 39% year-over-year that required doubling the size of our distribution network that we had built in Amazon’s first 25 years – and done so in just 24 months.”
Jassy noted that going forward, Amazon aims to focus more on efficiency. “Today, when we are no longer looking for physical capacity or staffing, our teams are focused squarely on improving productivity and profitability across our fulfillment network. We know how to do this and we’ve done it before,” he explained. “It may take some time, particularly as we work through inflationary and supply chain pressures, but we are seeing encouraging progress on a number of customer experience dimensions, including the speed of delivery, as we are now approaching levels not seen in months before the pandemic in early 2020.”
Retailers of all stripes are grappling with the same issues, according to Edge by Ascential’s Baker. “Amazon had a tough quarter. However, the challenges facing the company are common to the entire retail industry. Inflationary pressures and rising shipping and logistics costs are putting pressure on retailers and brands at all levels,” he said. “Despite these challenges, data from Edge by Ascential shows that e-commerce will continue to be the #1 driver of U.S. retail growth from 2021-2026, growing 14% in 2022. “