Amazon released its first-quarter 2022 financial results at the end of April, and they were disappointing. For the first time since 2015, the company reported a loss. As a result, its stock sank 12%, reaching a two-year low.
First Quarter Results
Amazon’s Q1 2022 net loss was $3.8 billion, or $7.56 a share, owing to a $7.6 billion write-down of its investment in electric vehicle manufacturer Rivian. Otherwise, net sales increased 7% to $116.4 billion in the first quarter, compared with $108.5 billion in 2021. Operating income decreased to $3.7 billion in the first quarter of 2022, a 55% decline from the same period in 2021.
In Q1 2021 the company achieved a profit of $8.1 billion, or $15.79 a share.
North American net sales grew by 8% over the same period last year, reaching $69.2 billion vs. $64.4 billion. However, the company incurred an operating loss of $1.6 billion vs. $3.5 billion in the first quarter of 2021. International sales were down 6% year-over-year, coming in at $28.8 billion vs. $30.6 billion last year. There was an operating loss of $1.3 billion, down 202% from the first quarter of 2021 when income was $1.3 billion.
For the first time, Amazon services constituted a majority of net sales at 52%.
Amazon Web Services, which has a profit margin of 35% and is the largest global provider of cloud services, stood out in terms of performance. Its net sales grew almost 37% year over year from $13.5 billion to $18.4 billion. Its operating income increased 57% from $4.2 billion to $6.5 billion.
Subscription services, including Amazon Prime memberships, took in $8.4 billion for Q1, an 11% increase from the $6.4 billion in Q1 last year.
The company’s guidance for the second quarter of 2022 was downbeat, catching Wall Street analysts by surprise. Amazon expects net sales between $116 billion and $121 billion and contemplates another possible net loss.
Q3 2022 should have better results, as Prime Day will be in July. However, both analysts and Amazon see a decline in ecommerce post-pandemic as shoppers return to brick-and-mortar stores. Amazon representatives said in its earnings call they would focus on driving down costs in the second quarter. The company also announced the closing of six Whole Foods stores in four states this month.
On April 28, Amazon imposed a 5% fuel surcharge on all FBA sellers, the first time such a fee was implemented.s Prices from third-party sellers will likely rise to make up for increased costs. Third-party sellers are also grappling with the frequent changes in how much inventory Amazon will allow them to ship to its warehouses and how this affects their rankings on the marketplace.
The Institute for Local Self-Reliance, an advocacy group for small businesses, says that Amazon took a 34% share of each FBA merchant’s sales on the site in 2021, up from 19% in 2014 and that the new fuel charge will push the percentage even higher.
Consumers did not escape price increases either. In the last quarter of 2021, the company increased the monthly Prime fee from $12.99 to $14.99, and the annual membership rose from $119 to $139, a 17% increase.
Buy with Prime
In April, Amazon started a beta test — a “Buy with Prime” service that lets a select group of FBA merchants offer Prime deliveries and other Prime benefits through their own online stores. Amazon said it would expand the program throughout the year to include merchants that don’t use its fulfillment service and eventually to those companies that don’t sell on its platform.
This program would put Amazon into direct competition with UPS. As Amazon is UPS’s largest customer, this move would drastically impact UPS’s revenue. The program would also lessen Amazon’s reliance on the USPS.