Amazon posts record sales; The cost of Amazon Prime is rising

An improving economy and a lingering virus are beginning to weigh on Amazon’s retail business, even as its cloud computing business has ...


An improving economy and a lingering virus are beginning to weigh on Amazon’s retail business, even as its cloud computing business has grown and an investment boosted profits.

The company, whose profits, number of employees and share price ballooned two years ago as Covid forced people to stay at home, said Thursday that its fourth-quarter operating profit fell to $3.5 billion, about half of the $6.9 billion it earned in the fourth quarter of 2020.

To offset its increased costs, Amazon said it was raising the annual price of its Prime shipping club to $139 from $119. The company said the 17% rise was Prime’s first increase since 2018.

“As expected over the holidays, we saw increased costs due to labor shortages and inflationary pressures, and these issues continued into the first quarter due to omicron,” said Andy Jassy, ​​​CEO of Amazon, in a press release.

Net income, however, rose sharply due to what Amazon called a “pre-tax valuation gain” in Rivian Automotive, an Amazon investment that went public in the fourth quarter. Amazon owns about 20% of the electric vehicle manufacturer.

That pushed net profit up to $14.3 billion from $7.2 billion a year ago. Without Rivian, net income would have slipped to $2.5 billion, the company said. Revenue hit a record $137.4 billion, slightly below what analysts expected.

Amazon controls about 40% of the e-commerce market, but that business — the one it started with and is still best known for — is increasingly the weakest part of the business. Online retail sales were essentially flat in the fourth quarter compared to 2020.

“Growth is definitely slowing down,” Tom Johnson, global digital director at Mindshare Worldwide, said in a note. “Comparisons to the hyper-growth quarters of the start of the pandemic, supply chain issues impacting ad spend, and ongoing incremental costs all point to the conclusion that the period of accelerated growth is over. “

AWS, the cloud division of Amazon, recorded its usual impressive performance, with operating profit up 49%. Ad revenue was $9 billion, up 37%. Twitter, which derives the vast majority of its revenue from advertising, has annual sales of less than $5 billion by comparison.

In regular trading Thursday, as investors worried about what was to come, Amazon shares fell 8%. But after the earnings release, investors focused on the good news, quickly sending Amazon shares up about 17% in after-hours trading before starting to pull back.

Andrew Lipsman, senior analyst at research firm Insider Intelligence, attributed Wall Street’s optimism to two things.

“There has been the increase in the price of Prime membership and the continued acceleration of AWS growth and its increasing impact on bottom line,” he said. “Perhaps there is also some leniency for the e-commerce deceleration given the extraordinarily difficult comparisons from a year ago to the fourth quarter of 2020.”

Amazon added 140,000 workers during the quarter, giving it a total of 1.6 million employees. It was up 24% in one year. Walmart, America’s largest non-governmental employer, has 2.2 million workers.

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Newsrust - US Top News: Amazon posts record sales; The cost of Amazon Prime is rising
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