Filed Under: Business

Amazon could make $0 profit on $140 billion in sales for holiday season

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Amazon told investors Thursday night the company is in danger of not making a profit in the final quarter of the year (Q4). The company could make $140 billion in Q4 sales and still not see a dime of profit. The announcement came hours after Amazon reported its third quarter financial results. The company made $110.8 billion in Q3, a 15% increase from 2020’s Q3 numbers. Amazon said its Q4 profit concerns are chiefly due to an expected increase in costs.

“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,” Amazon CEO Andy Jassy said Thursday. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

Another factor that could come into play is the labor shortage. Amazon has been advertising that the company is hiring throughout the month of October. Amazon CFO Brian Olsavsky said the company spent an extra billion dollars on new hire bonuses and wage increases in Q3. That cost could double during the holiday season.

Amazon shares sank 4% in post-market trading on the news. On Friday, global shares were mostly lower despite the latest rally on Wall Street.

Both the pace of economic growth and the state of the jobs market are on investors’ minds as they look ahead to the Federal Reserve’s meeting next week. The Fed is expected to address how it moves forward with plans to trim bond purchases, as well as the Fed’s position on interest rates.

Rising energy prices have also raised concerns about the cost for consumers as they pay more to fill gas tanks and heat homes heading into the winter. U.S. crude oil prices have jumped more than 70% so far this year.

Simone Del Rosario: AMAZON IS SKATING ON SOME DANGEROUSLY THIN MARGINS THIS HOLIDAY SEASON.

THE COMPANY TOLD INVESTORS THURSDAY NIGHT IT COULD HAVE UP TO 140 BILLION IN SALES THE REST OF THE YEAR – AND NOT MAKE A DIME IN PROFIT.

AMAZON SHARES SANK 4 PERCENT IN POST-MARKET TRADING ON THE NEWS.

THE ONLINE RETAILER IS EXPECTING TO TAKE ON BILLIONS IN EXTRA COST THIS QUARTER. 

ANDY JASSY, THE NEW CEO, SAYS IT’S BECAUSE OF “LABOR SUPPLY SHORTAGES, INCREASED WAGE COSTS, GLOBAL SUPPLY-CHAIN ISSUES, AND INCREASED FREIGHT AND SHIPPING COSTS.”

BUT WHAT DOES THAT MEAN FOR THE VAST MAJORITY OF AMERICANS WHO’VE COME TO RELY ON TIMELY DELIVERIES? DURING THE MOST IMPORTANT SHOPPING SEASON OF THE YEAR?

“JASSY SAYS THEY’RE DOING WHATEVER IT TAKES TO MINIMIZE THE IMPACT ON CUSTOMERS AND SELLING PARTNERS THIS HOLIDAY SEASON.”

SO CLEARLY AMAZON IS A VICTIM OF THE SUPPLY CHAIN ISSUES WE’RE SEEING – BUT MAYBE YOU’VE ALREADY CAUGHT A GLIMPSE THAT THE LABOR SHORTAGE IS AN EVEN BIGGER ISSUE FOR THEM. 

“I drop off and pick up my kids from school so i can’t work early or late.”

AMAZON’S BEEN ADVERTISING IT’S HIRING ALL OVER TV THIS MONTH. THE CFO SAID LAST QUARTER THE COMPANY SPENT AN EXTRA BILLION DOLLARS ON NEW HIRE BONUSES AND WAGE INCREASES, AND THAT COST COULD DOUBLE DURING THE HOLIDAY SEASON.

I’M SIMONE DEL ROSARIO FROM NEW YORK IT’S JUST BUSINESS.

Amazon told investors Thursday night the company is in danger of not making a profit in the final quarter of the year (Q4). The company could make $140 billion in Q4 sales and still not see a dime of profit. The announcement came hours after Amazon reported its third quarter financial results. The company made $110.8 billion in Q3, a 15% increase from 2020’s Q3 numbers. Amazon said its Q4 profit concerns are chiefly due to an expected increase in costs.

“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,” Amazon CEO Andy Jassy said Thursday. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

Another factor that could come into play is the labor shortage. Amazon has been advertising that the company is hiring throughout the month of October. Amazon CFO Brian Olsavsky said the company spent an extra billion dollars on new hire bonuses and wage increases in Q3. That cost could double during the holiday season.

Amazon shares sank 4% in post-market trading on the news. On Friday, global shares were mostly lower despite the latest rally on Wall Street.

Both the pace of economic growth and the state of the jobs market are on investors’ minds as they look ahead to the Federal Reserve’s meeting next week. The Fed is expected to address how it moves forward with plans to trim bond purchases, as well as the Fed’s position on interest rates.

Rising energy prices have also raised concerns about the cost for consumers as they pay more to fill gas tanks and heat homes heading into the winter. U.S. crude oil prices have jumped more than 70% so far this year.

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