On Thursday, Amazon revealed that sales growth would decrease in the third quarter as a result of the slowly fading effects of the coronavirus pandemic. The lockdown has eased in many cities and the availability of vaccines makes it possible for people to be able to leave their homes and go back to traditional shopping options. The projection comes not too long after Andy Jassy replaced Jeff Bezosas CEO of Amazon. Jeff Bezos, Amazon’s founder held the position of CEO for 27 years.
Amazon, alongside a handful of other companies, had benefitted from the pandemic-induced sales as many physical stores were shut down, people couldn’t leave their homes and had no choice but to turn to online options such as Amazon. This sales boom is beginning to wear off as the economy opens up and vaccines become widespread.
At the onset of the pandemic, when people could not access physical stores, Amazon reported figures that became new milestones, it garnered over 200 million Prime loyalty subscribers, and recruited over 500,000 workers to keep up with surging demand. Currently,the retail giant is facing the challenge of surging higher. In the first quarter of this year, the company saw revenue grow 44 percent and for the quarter ended June 30th, the figure fell to 27 percent. The company forecasts that sales may only grow as much as 16 percent in the third quarter.
Amazon shares fell 7 percent in after-hours trade after thestatements. The company’s Chief Financial Officer; Brian Olsavsky, noted that consumers were confined to their homes and relied on platforms such as Amazon to do as much as survive and with the freeing of lockdowns and increasing availability of a vaccine, it is not expected that results remain the same. Customers are “doing other things besides shopping”, he said. According to what he told reporters, Amazon expects this lower growth to continue for the next few quarters.
Amazon reported revenue of $113 billion for the second quarter and failed to beat the average estimate of $115 billion. North America, which is the company’s largest market, saw sales increase only 22 percent in the second quarter, compared to 43 percent in the same period a year earlier. Amazon’s cloud computing division formerly led by Andy Jassy, however, saw revenue rise 37 percent to $14.8 billion, beating estimates of $14.1 billion. Profit went up 48 percent to $7.8 billion, making it the second-largest quarterly result Amazon ever announced.
Commenting on the results, Brian Yarbrough, an analyst with Edward Jones, said it was “not feasible” for Amazon to keep growing the same with when people had no choice but to stay home. He said that “No doubt, online retail will probably slow down to that growth somewhere in the 10 percent to 12 percent range. It’s still phenomenal growth when you think of the sheer size of the business. Obviously, the pandemic helped them, but they’re not going to be able to grow that rapidly on top of those numbers.”