Amazon’s sales growth slows as online shopping drops

by Jonathan Adams
Amazon sales

The online giant delivered sales results that were short of expectations and offered a disappointing outlook for the current quarter

The return to near normalcy across the world is slowing down Amazon’s pandemic-induced sales surge.

The online giant on Thursday posted better-than-expected second-quarter profits. But it delivered sales results that were short of expectations and offered a disappointing outlook for the current quarter.

Amazon said that revenue will be in the range of $106 billion to $112 billion for the third quarter. Analysts were looking for $119.3 billion.

Shares in Amazon dropped over 7% in after-market trading.

Amazon is one of the few retailers which prospered during the pandemic. As physical stores selling non-essential goods like clothing closed temporarily or permanently, people stuck at home turned to Amazon for everything from groceries to cleaning supplies.

Chief Financial Officer Brian Olsavsky said the slowdown in sales growth is a result of the company lapping against last year’s huge pandemic-induced COVID-19 shopping binges. The slowdown also reflects that people, particularly in Europe and the U.S., are more mobile and are doing other things besides shopping online.

When the pandemic hit and lockdowns began in March 2020, it took some time for Amazon to add more workers and expand its capacity to meet a surge in shopping. By May 2020, the company’s revenue growth rate climbed in the 35% to 40% range from what had been a 20% to 21% range during the pre-pandemic days. It remained at that level through the first quarter of this year, when its revenue growth hit 41%.

Excluding its annual Prime Day event, held in June this year, Amazon’s year-over-year (YOY) percentage growth rate has declined into the mid-teens. Its revenue guidance for the current quarter now forecasts a range of 10% to 16% growth.

Amazon executives say a more accurate way of assessing its growth rate is on a two-year compounded annual rate, which remains at a hefty 25% to 30%.

Olsavsky told reporters that rising coronavirus infections linked to the delta variant are pushing the company to get more workers vaccinated. It’s also working with local authorities on safety measures. He said that could mean requiring workers to wear masks in some areas, even if vaccinated.

The bigger goal is to stamp this out and get people vaccinated and have a successful return to life, Olsavsky said.

This article is for information purposes only.
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