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Amazon Forecasts Continued Slowdown In Growth Despite Record Quarterly Profits

Amazon Forecasts Continued Slowdown In Growth Despite Record Quarterly Profits
With the rollout of Covid-19 vaccines allowing customers to venture more outside the home and shop at physical stores more than during the pandemic, a warning of a slow down in sales growth in the next few quarters was issued by Inc on Thursday.
This coincides with Andy Jassy replacing Jeff Bezos as the CEO of the company after 27 years.
The company said that there had been a slowdown in the spending of growth by Prime members, the most valuable customers of Amazon.
Amazon had reported record profits during the pandemic last year after the pandemic related restrictions forced the closure of physical stores across the world. The company also raked up more than 200 million Prime loyalty subscribers and appointed more than 500,000 people to meet the sudden surge in demand.
The task now for the company is to continue to climb up higher. The company had reported a 44 per cent surge in revenue for the first quarter of this year which dropped to 27 per cent for the quarter ended June 20. Amazon said the growth in sales could be as much as only 16 per cent for the third quarter.
A difficult comparison to the company’s performance last year was the reason for this reduced growth, said Brian Olsavsky, Amazon's chief financial officer. During the pandemic last year, people were mostly forced to remain indoors and depend on e-commerce to get their daily supplies. But customers are now out and about in the United States and Europe.
They are "doing other things besides shopping," he said.
For the second quarter, the company reported revenue of $113 billion which was short of expectations of analysts of $115 billion, according to IBES data from Refinitiv.  The company however reported a 48 per cent rise in profits to $7.8 billion.
Olsavsky told reporters the company now anticipates this lower growth to continue for the next few quarters.
On July 5, Jassy took over as the CEO of Amazon with the company becoming bigger and more complex than ever. An acquisition deal for the film studio MGM for $8.5 billion was announced by the company last year, thereby diversifying into Hollywood while also running a grocery chain and building up a healthcare business while facing regulatory scrutiny of its business practices throughout the world.
Amazon hopes that the pandemic will subside soon and the global economy will continue to emerge from the pandemic hit, Olsavsky said. And contrary to tech peers Alphabet Inc and Facebook Inc, who have said that their employees will need to be vaccinated to return to offices, no such announcement has been made by Amazon.
Staff protests over safety precautions had hit amazon during the pandemic while a high-profile effort to create a workers’ union in the company failed in a facility in Bessemer, Alabama.
It was "not feasible" for Amazon to continue to grow at this pace, said Brian Yarbrough, an analyst with Edward Jones.
"It's still phenomenal growth when you think of the sheer size of the business," he said. "Obviously the pandemic helped them, but they're not going to be able to grow that rapidly on top of those numbers."

Christopher J. Mitchell

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