Amazon Posts a Loss as Online Shopping Slows, Stock Tanks

Amazon swung to a loss in the first quarter as the receding pandemic tempted consumers away from online shopping and a souring investment in Rivian Automotive prompted a $7.6 billion “non-operating expense.”

The e-commerce giant said Thursday that product sales slid 1.8% and revenue from sellers on its marketplace dropped 1% in the quarter ended March 31 as it did a year earlier. The slipping performance reflected the loosening grip of the COVID-19 pandemic and the return of consumers to physical stores.

Amazon was also hit by the declining price of Rivian shares. The company invested in the electric truck maker before it went public. Though Rivian’s shares initially surged and reached a high of around $180, the stock price has since sunk to about $32 a share.

The company indicated that strong growth is unlikely to return soon given the state of the global economy and war in Ukraine. Amazon forecast operating income in the second quarter would range between a loss of $1 billion and a profit of $3 billion. A year earlier the company posted $7.7 billion in operating income.

The report prompted a selloff in Amazon shares that continued on Friday, when the stock dropped 14% to $2,485.63.

The earnings performance comes after Amazon warned in its annual shareholder letter that costs were cutting into its margins. Fuel costs, which have soared since Russia invaded Ukraine, were cited as a particular culprit. The company added a 5% fuel surcharge to a fee paid by third party sellers who use Fulfillment By Amazon in March. 

“The pandemic and subsequent war in Ukraine have brought unusual growth and challenges,” CEO Andy Jassy said in a statement.

In the first quarter, Amazon posted a loss of $7.56 per share, well off the $8.36 profit per share that analysts had forecast. The performance was far from $15.79 earnings per share the company posted in the same quarter last year.

Revenue rose 7% from a year ago to $116.4 billion. That edged out the $116.3 billion forecast by analysts, according to Yahoo.

Amazon’s operating income, which excludes its investment in Rivian in addition to taxes and interest payments, decreased to $3.7 billion from $8.9 billion in the previous year. Brian Olsavsky, Amazon’s chief financial officer, said Thursday that the company built its warehouse capacity extensively since the beginning of the pandemic to keep up with demand, but that now the increase in warehouses has exceeded demand.

“Put simply, the cost of running Amazon — which was already hefty — is becoming dramatically more expensive,” said Neil Saunders, a retail analyst with Global Data.

The company indicated that Prime Day, its annual shopping holiday, would likely take place in July. Last year, Prime Day took place in late June.