On-Line Sales Growth Returns to Positive, but Still Lower than Fulfillment and Shipping Costs

Supply Chain Digest Says...   Fulfillment costs, which do not include shipping, rose 11% to $20.5 billion. Compare that to the increase in on-line sales of 7%. What do you say? Click here to send us your comments   Click here to see reader feedback

Amazon was out with its Q3 2022 earnings release late last week, and despite mixed results Wall Street didn’t like what it heard, sending its share down almost 20% to around $103, well below it’s all-time high of around $185 seen in July of 2021 and then almost equaled last November.

On the positive side, Amazon saw overall net revenue increased 15% to $127.1 billion in the third quarter, compared with $110.8 billion in third quarter 2021.

On-line sales grew 7%, and whether that is good or not depends on your perspective. For the past three quarters, dating back to Q4 of 2021, Amazon actually saw a low single digit decline in that measure, as ecommerce activity seems to have stalled in the US.

At the recent Parcel Forum conference in Chicago, Morgan Stanley analyst Ravi Shanker noted that the incredible growth of ecommerce during the pandemic turned out to not be as permanent as many thought, with consumers returning to brick and mortar stores and purchasing more services versus the buying spree in goods seen in the pandemic.

However, profits in the quarter fell to $2.9 billion from $3.2 billion, and that includes $1.1 billion in non-operating income from Amazon’s investment in electric vehicle maker Rivian Automotive.

Operating income decreased to $2.5 billion in the third quarter, compared with $4.9 billion in third quarter 2021. And in fact, Amazon’s North America segments saw small operating losses in the quarter, while international saw a loss of $2.5 billion.

Those losses were offset by Amazon’s AWS web services segment, which had operating income of $5.4 billion, compared with operating income of $4.9 billion in third quarter 2021.

Operating cash flow decreased 27% to $39.7 billion for the trailing twelve months, compared with $54.7 billion for the trailing twelve months ended September 30, 2021.

Fulfillment costs, which do not include shipping, rose 11% to $20.5 billion. Compare that to the increase in on-line sales of 7%.

Shipping costs rose 10% to $19.9 billion.

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Select news or activity in the quarter highlighted by Amazon include:

Announced it is investing nearly $1 billion in pay increases for its fulfillment network employees over the next year in the U.S., bringing average pay to more than $19 per hour.

Expanded Anytime Pay to provide hourly employees with instant access to up to 70% of their pay at any time during the month.

Announced it is investing more than $450 million over the next year to help Delivery Service Partners (DSPs) support their teams with access to new and improved benefits, and additional rate increases.

Announcing plans to invest more than €1 billion over the next five years to further electrify and decarbonize its transportation network across Europe. This includes investments in electric trucks, vans, and micro mobility solutions like e-cargo bikes, as well as charging infrastructure.

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