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Amazon to close some Fresh stores after big drop in full-year profits

By Nagasunder in Amazon News, posted February 6, 2023

Amazon will close some Fresh stores after revealing its international sales fell by eight percent.

The company's full-year profits have shrunk to $12.2 billion as sales across the globe dropped.

As a result, CFO Brian Olsavsky says Amazon has "decided to exit certain stores with low-growth potential" as part of its extensive cost-cutting efforts.

The retailer took a $720 million impairment charge in the fourth quarter.

Amazon will also temporarily halt Fresh grocery store expansion until it can find a format that distinguishes itself from other retailers.

CEO Andy Jassy told analysts Amazon's stores need to resonate with customers and the company needs to be in a position "where we like the economics".

Losses at the online retailer's international division increased from $900 million in 2021 to $7.7 billion last year.

Demand in Europe and the UK was hurt by high inflation and the Ukraine war, lowering international growth rates, Olsavsky said.

Despite the fact that the online retailer's global sales over Christmas exceeded analyst expectations, international sales were down eight percent year on year to $34.5 billion.

However, when foreign exchange rates were excluded, this amounted to a five percent increase.

Amazon expects to earn between $0 and $4 billion in operating income this quarter, up from $3.7 billion in the same quarter last year.

Although Olsavsky attributed this to a slowing in cloud and Amazon ad sales, he also mentioned retail demand as a factor.

Olsavsky said: “We remain nervous as everyone else is about the consumer spending and how people will prioritise their budgets moving forward”

Consumer spending shifted more to value brands in some categories and home essentials in its last quarter.

Jassy said: “Our relentless focus on providing the broadest selection, exceptional value, and fast delivery drove customer demand in our stores business during the fourth quarter that exceeded our expectations – and we’re appreciative of all our customers who turned to Amazon this past holiday season.”.

“We’re also encouraged by the continued progress we’re making in reducing our cost to serve in the operations part of our stores business.”

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“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon.”

Source: Retail Gazette