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Amazon's online sales down for the first time since 2015

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By Newsvot News - - 5 Mins Read

Despite a decline in online retail sales and high prices, Amazon reported its slowest-ever revenue growth in the first quarter, and said its ambitious expansion during the coronavirus pandemic had left it overstaffed and with surplus capacity.

Amazon's online retail arm saw sales of $51.1 billion in January-March, down from $52.9 billion the previous year.

Operating income of $3.7 billion in the first quarter fell short of analysts' forecasts of $5.3 billion, compared to $8.9 billion the previous year. The company's entire sales for the quarter was $116.4 billion, up 7% over the previous year. Amazon forecasts a similar low revenue increase of between 3% and 7% for the current quarter.

Following the announcement, the company's stock dropped as much as 10% in after-hours trade on Thursday.

The company's performance was poorer than planned due to supply chain difficulties, increased staffing costs, and inflation.

The corporation lost $3.8 billion in the quarter, including $7.6 billion in the value of its share in Rivian, an electric vehicle manufacturer.

Amazon Web Services CEO Andy Jassy

"The epidemic and subsequent war in Ukraine have brought unexpected growth and challenges," Amazon CEO Andy Jassy stated, adding that delivery speeds and consistency are "approaching levels not seen since the months immediately preceding the outbreak in early 2020."

Amazon's chief financial officer, Brian Olsavsky, told reporters that the business was halting its aggressive growth of storage space during the epidemic, implying that it had gone overboard on capacity additions.

"From a space sense, the amount of space we're planning to add in 2022 is substantially smaller than 2021 and 2020, and we're even questioning a lot of that," he said. "However, you make warehouse commitments 12 to 18 months in advance, so it's difficult to change that on a dime."

In contrast to its record recruitment push during the epidemic, Olsavsky stated that Amazon was now "overstaffed," resulting in $2 billion in higher costs due to reduced productivity rates during the quarter.

During the quarter, the company had a high of 1.7 million employees, which has subsequently been lowered to 1.6 million.

Amazon's balance sheet has been bolstered this year by robust cloud computing growth, despite quickly expanding operating costs in its retail division.

Amazon Web Services' revenue in the first quarter was $18.4 billion, up 37% year over year. The cloud segment generated $6.5 billion in operating income, compared to a $2.8 billion loss for Amazon's retail business in the US and globally. According to FactSet statistics, cloud revenues surpassed analysts' projections of $18.27 billion.

"Amazon's results demonstrate that it is not immune to the macroeconomic slowdown that is affecting retail and online," said Guru Hariharan, CEO of CommerceIQ, an ecommerce management platform.

"As inflation and cost hikes continue, buyers are reducing their spending, particularly discretionary spending, which is disproportionately ecommerce."

In late-night trading, the company's stock dropped more than 7%. Concerns have expanded to other web-based shops, adding to the fear in US markets, which have been declining recently.

Apple's positive results first appeared to help some people overcome their fears.

Deals increased by 9% year over year to $97.3 billion, while benefits increased by over 10% to $25 billion, according to the iPhone inventor.

However, in a conference call with examiners to discuss the results, executives projected a less optimistic tone, presenting success despite a "trying macroeconomic climate."

"We are not immune to these challenges," CEO Tim Cook said, "but we have tremendous faith in our people, our products and administration, and our method."

Coronavirus-related closures in China, as well as chip shortages, are limiting the company's ability to meet demand, according to Mr Cook. He went on to say that he was more concerned about supply concerns than expenditure cuts by buyers.

Meanwhile, in the company's sites, there is a growing drive for unionization. Workers at a US Amazon site in Staten Island, New York, voted to create the first union earlier this month, and voting at a second, smaller facility began this week. A determination on the legitimacy of contested ballots is pending in a third vote in Bessemer, Alabama.