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| Amazon fails to generate profits and revenue |
Amazon announced its financial results for the third quarter ending September 30, 2021. After reporting weaker-than-expected results for the third quarter and giving a disappointing outlook during the crucial holiday season, the stock price fell.
With sales of $110.81 billion, Amazon is facing slower sales growth as consumers return to physical stores.
The company faces challenges related to the supply chain. Third-quarter sales are up 15%, compared to 37% for the same period last year.
For the fourth quarter, Amazon expects sales of between $130 billion and $140 billion, an increase of 4 to 12 percent.
Andy Gacy, Amazon CEO, said the company expects the final quarter of the consumer business to add billions of dollars in additional costs due to labor shortages, rising labor costs, global supply chain constraints, and rising transportation costs.
The company faces these challenges when it comes to the Christmas season. "It costs us a lot of money in the short term," he added. But this is the right priority for our clients and partners.
As part of the global challenge, the company has taken steps to strengthen its supply chain by adding new shipping ports and boosting its fleet of aircraft and trucks.
Amazon announced earlier this month that it would hire 275,000 permanent and seasonal workers in the United States to help deal with the Christmas shopping boom.
The chief financial officer said the company faced high labor costs in the last quarter of this year because it wanted to hire and retain employees, including introducing new perks like free school fees.
Amazon spends billions to avoid delivery delays
The company expects to generate $4 billion in labor costs, inflation and inventory productivity issues.
Online store sales increased 3% year-over-year to $49.9 billion. Brick and mortar sales rose 13 percent to $4.27 billion.
Third-party services revenue (including market commissions plus fulfillment and shipping) increased 18% to $24.25 billion, from 34% in the second quarter and 60% in the first.
For the first time in its history, Amazon service revenue has exceeded retail sales. Net product sales for the quarter were $54.9 billion. Amazon Web Services, advertising, third-party service, and Prime subscription revenue was $55.9 billion.
AWS beat expectations, increasing revenue 39% to $16.11 billion. Its operating revenue was $4.88 billion during that period.
The operating profit of the parent company is only $880 million. Unless there is a big win from AWS, Amazon will lose this quarter.