Amazon’s Covid-era buildout proves too much as demand cools

Bloomberg

Amazon.com Inc acknowledged that a hiring and warehouse-building binge during the pandemic is catching up with the company as e-commerce sales growth inevitably slows from the torrid pace of the outbreak.
That reality will weigh on revenue and profit going forward as consumers return to their pre-pandemic habits and inflation may cool their spending. Fuel and labour costs are already biting, and executives said Amazon was watching for whether shoppers will trim their purchases to offset rising prices.
Amazon said it lost money during the first quarter and gave a forecast that said it may see another loss in the current period. Sales will be as much as $121 billion in the three months ending in June, missing analysts’ average estimate of $125 billion. It’s an unwelcome development for Chief Executive Officer Andy Jassy, who has inhabited the top job for less than a year and signalled that it would take time for the company to get a handle on economic pressures and an overbuilt logistics network that is hampering Amazon’s productivity.
“Losing money in North America just seems like something investors thought we were beyond,” said Brian Yarbrough, an analyst at Edward Jones. “Amazon needs to prove to investors that as they slow down spending, they can improve profits. Today’s numbers were pretty disappointing.”
Before the earnings report, Wall Street analysts had been almost unanimous in their
optimism about Amazon’s prospects, citing the massive investments in package handling and delivery facilities and continued growth in the highly profitable cloud-computing and advertising businesses.
But Chief Financial Officer Brian Olsavsky said the company’s rapid expansion left it with too much warehouse capacity and too many workers, which will take a while to work through.
Amazon, America’s second-largest private employer, hired roughly 780,000 people over the past two years, bringing its workforce to 1.62 million. It also raised wages, paid out bonuses for new hires and was willing to send out half-empty vans to ensure customers got their packages on time.