Amazon Christmas marketing push pays off with higher net sales

Amazon yesterday beat sales expectations for the last quarter of 2022 after a marketing blitz during the holiday period helped attract shoppers.

The world’s largest retailer lowered Wall Street’s expectations for the current quarter, however, and shares in the group dropped 4.8 per cent, or $5.21, lower at $112.91 in after-hours trading.

Net sales rose 9 per cent to $149.20 billion in the fourth quarter, compared with analysts’ forecasts of $145 billion, according to Refinitiv. The retailer said that it was expecting net sales of between $121 billion and $126 billion for the first quarter, however. Analysts were expecting $125.11 billion.

Andy Jassy, chief executive, said: “Our relentless focus on providing the broadest selection, exceptional value and fast delivery drove customer demand in our Stores business during the fourth quarter that exceeded our expectations — and we’re appreciative of all our customers who turned to Amazon this past holiday season.”

Brian Olsavsky, chief financial officer, warned that company expects slower cloud growth rates for the next few quarters as it worked with customers to optimise costs.

He added that Amazon remains nervous about consumer spending and how people will prioritise family budgets in the near future.

Last month, Jassy said that more than 18,000 employees, particularly in its commerce and human resources divisions would lose their jobs.

Amazon employs about 1.5 million globally with about 75,000 staff based in Britain. Hundreds of Amazon workers in Britain took strike action last month for the first time, with a third of staff walking out at a warehouse in Coventry in a dispute over pay.

Amazon is seeking new revenue in the face of higher gas and consumer prices that have discouraged shoppers from spending online, especially in Europe. The company plans to charge certain grocery delivery fees for US Prime members, on top of recent price increases to join the loyalty programme; it has created an add-on generic-drug subscription to attract business as well.

Jassy, 55, said last night that the company was making progress on cost cutting, adding “in the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon”.

Amazon’s outlook is in particular tied to the fortunes of its cloud-computing division. Long a major source of profit, Amazon Web Services has seen sales growth slow down, and industry executives, including at rival Microsoft, have said that economic uncertainty has prompted enterprises to rethink how much they’re willing to spend on cloud.

The Amazon division fell short of estimates of more than $22 billion in fourth-quarter cloud sales, increasing them by 20 per cent to $21.4 billion.

An October sale to encourage early holiday shopping on Amazon helped with retail revenue, to a point. The company’s total net sales were $149.20 billion in the fourth quarter, compared with analysts’ expectations of $145.42 billion, according to IBES data from Refinitiv.

The $1.1 trillion business was founded by Jeff Bezos, the former chief executive, from his garage in Bellevue, Washington in 1994. Initially an online marketplace for books, it has grown into an international giant, selling its own products like Alexa and Kindle tablets, and setting up its own television streaming arm, Amazon Studios. It has also branched into groceries with AmazonFresh.

Separately last night Alphabet fell short of expectations for both profit and sales as the owner of Google and YouTube grapples with a slowdown in the face of heightened economic apprehension. The world’s largest online advertising business endured a drop in ad sales as clients trim their budgets amid fears of recession.

Revenue at Alphabet rose by 1 per cent to $76.05 billion in the last quarter. Net income dropped by 3 per cent to $13.6 billion. Its shares dropped 4.6 per cent during after-hours trading.

Sundar Pichai, chief executive of Alphabet, highlighted its “long-term investments in deep computer science” which he said have ensured the group is “extremely well-positioned” in artificial intelligence. “I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond,” he added.

“There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices,” Pichai said. “We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.”

The latest figures come after Meta Platforms, which owns Facebook and Instagram, eased concerns around its outlook by forecasting a robust first quarter, cutting its spending projection and boosting a stock buyback plan by $40 billion. Shares in the social media giant rallied by 23.3 per cent, or $35.65, to $188.77 yesterday.