Amazon doubles its profits at the end of the year despite the lack of labor

Posted 04 February, 2022

Amazon beat investor expectations during the crucial holiday season, despite declining profitability due to rising labor costs and supply chain challenges.

The e-commerce giant posted revenue of $137.4 billion, in line with its fourth-quarter forecast, and doubled its net profit to $14.3 billion, according to an earnings release on Thursday.

Its net profit has largely benefited from a return on investment, thanks to stakes in the car manufacturer Rivian, which went public in November.

But the market was not choosy: Amazon's stock jumped 14% during electronic trading after the closing of the New York Stock Exchange, after a day in sharp decline.

The group said it had its "best shopping weekend" for the sales period which runs from Black Friday to Cyber ​​Monday (the Friday and Monday after the American holiday of Thanksgiving).

“Amazon managed to exceed expectations in both revenue and profit despite an overall less buoyant holiday season for e-commerce in general,” commented Andrew Lipsman, an analyst at eMarketer.

"And the continued acceleration of AWS (the cloud arm, editor's note) helped bolster a bottom line that would have shrunk without the boost from the Rivian investment."

Declining profitability

The Seattle group has been one of the big winners of the pandemic.

The health restrictions linked to the Covid-19 epidemic have indeed led consumers who are still reluctant to adopt e-commerce en masse, starting with Amazon and its promises of ultra-fast delivery, and cloud-based services, including Amazon, is the world leader.

And the habits taken in 2020 seem set to last. Over the whole of 2021, Amazon earned nearly $470 billion in revenue (+21%) and more than $33 billion in net profit (+57%).

But, like many other brands, the company has been caught up in supply chain issues, high inflation, and difficulty in hiring.

In the fourth quarter, its operating profit, a key indicator of profitability, stood at 3.5 billion dollars, half less than a year ago.

The lack of manpower has cost the group $ 4 billion over this period, noted the boss, Andy Jassy, ​​during the conference with analysts.

And the Omicron variant weighs on the capacities of the warehouses: "A lot of people are on sick leave, we need replacements. (...) In some cases, we pay double or triple for the same hour worked", a- he detailed.

But he assured that these costs would be lower in the coming months and that he intended to improve the efficiency and pace of operations to "deliver faster than before the pandemic".

Amazon now employs more than 1.6 million people worldwide. The company said the starting wage for warehouse and logistics center workers now exceeds $18 an hour in the United States.

An argument that she will not fail to make in the face of attempts to unionize in Staten Island, New York, and also in Bessemer, Alabama. If successful, it would be the first union in an Amazon warehouse in the United States.

Carrier cloud

This month, Amazon plans to increase the price of the subscription to Prime in the United States (to 15 dollars per month), its premium delivery offer which also includes a video streaming platform.

The company expects revenues of between $112 billion and $117 billion for the current quarter, representing growth of 3 to 8% year-on-year.

She can rely on the cloud. In the fourth quarter, its remote computing service notably signed contracts with Nasdaq and also with Meta for its Facebook, Instagram, and WhatsApp networks and messaging services.

In all, AWS generated $17.78 billion in revenue over the period, 40% more than last year.

“Companies now spend twice as much on remote computing services as they do on their own data centers,” noted analyst John Dinsdale of Synergy Research Group.

Amazon will have to defend its market share, which is currently more than 32%, according to this firm. The number 1 in the sector is closely followed by Microsoft, now at 21%, followed by Google, which is flirting with 10%.

"Microsoft's growth is very impressive. The group has doubled its market share in 4 and a half years," said the analyst.

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04 February, 2022 10:52

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