Wendy future of retail top

Amazon earnings fall nearly 50% in third quarter

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SEATTLE — Higher costs on everything from labor to shipping took a toll on Amazon’s profits in the third quarter, the company said on Thursday. Net earnings plunged to $3.2 billion in the third quarter, down from $6.3 billion in the third quarter of 2020.

The online retail giant also gave guidance for the fourth quarter that was below analyst expectations. Amazon is forecasting net sales gains of between 4% and 12% compared to last year’s fourth quarter. And operating income is expected to be between $0 and $3.0 billion, down from $6.9 billion in the fourth quarter of 2020.

“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter—and you can see that during every phase of this pandemic,” Amazon CEO Andy Jassy said in a statement. “In the first several months of COVID-19, Amazonians played an essential role to help people secure the requisite PPE, food, and other in-demand items needed, and we worked closely with businesses and governments to leverage AWS to maintain business continuity as they responded to the pandemic.

“Customers have appreciated this commitment, which is part of what’s driving this past quarter’s AWS growth acceleration to 39% year over year; but, it’s also driven extraordinary investments across our businesses to satisfy customer needs—just one example is that we’ve nearly doubled the size of our fulfillment network since the pandemic began. In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs—all while doing whatever it takes to minimize the impact on customers and selling partners this holiday season. It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

Other highlights from Amazon’s third-quarter financial results include:

• Net sales increased 15% to $110.8 billion in the third quarter, compared with $96.1 billion in the prior-year period. Excluding the $0.5 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 15% compared with last year’s third quarter.

• Operating income decreased to $4.9 billion in the third quarter, compared with $6.2 billion in prior-year period. Operating cash flow decreased 1% to $54.7 billion for the trailing twelve months, compared with $55.3 billion for the trailing twelve months ended September 30, 2020.

• Free cash flow decreased to $2.6 billion for the trailing twelve months, compared with $29.5 billion for the trailing twelve months ended September 30, 2020.

• Free cash flow less principal repayments of finance leases and financing obligations decreased to an outflow of $8.8 billion for the trailing twelve months, compared with an inflow of $18.4 billion for the trailing twelve months ended September 30, 2020.

• Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations decreased to an outflow of $3.9 billion for the trailing twelve months, compared with an inflow of $17.9 billion for the trailing twelve months ended September 30, 2020.

    • Common shares outstanding plus shares underlying stock-based awards totaled 523 million on September 30, 2021, compared with 518 million one year ago.

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