Amazon disappoints market as sales growth slows

Amazon.com, Inc.’s new boss Andy Jassy had a tough start to his new job, having replaced Jeff Bezos a month ago, as the latest set of results disappointed the market. Sales in the quarter to 30 June jumped 27% to US$113bn compared to the same period in 2020, with net income up 48% to US$7.8bn. READ: Bitcoin slips as Amazon denies plans to accept crypto payments However, Wall Street had forecast sales of US$115bn and growth slowed down from a 44% climb in the first quarter. The deceleration is expected to continue, as the online giant guided for a 10-16% sales rise in the third quarter to US$106-112bn, with operating income down to US$2.5-6bn from US$6.2bn last year, including US$1bn of COVID-19 related costs. The retailer enjoyed a boom in trading during the pandemic as people shopped more online while stuck at home during lockdowns. The upwards trend is now slowing down as countries are easing restrictions and consumers get out more. “Amazon is increasingly bumping up against the law of large numbers – particularly in US retail. When you’re only selling US$1,000 of product a year, boosting sales by 40% is easy. When your annualised sales reach US$400bn, finding an extra US$160bn of sales is pretty difficult. It means Amazon’s having to spend big to deliver future growth, and capital expenditure is soaring, moving the group to a free cash outflow for the first time in a while,” said Nicholas Hyett, analyst at Hargreaves Lansdown. “To be fair to Amazon there are considerable Coronavirus related costs weighing on performance at the moment. And growth in service revenues, up 37% this quarter, have the potential to move profits faster than they move revenues – particularly marketing which we suspect is incredibly high margin. The group’s got plenty of irons in the fire for the future, it just needs to hope one of them comes off big.” Shares slipped 7% to US$3,331 in after-hours trading.