Amazon said that consumer spends strong, bucking broader retail gloom

Amazon said that consumer spends strong, bucking broader retail gloom

Aug 01, 2022: -This week, Walmart and Best Buy are lowering their profit outlook for the second quarter and full year, which sets off alarm bells across the retail sector that soaring inflation was influencing consumer spending. Shares of different retailers, which include Amazon, Target, and Macy’s, all decreased following Walmart’s announcement, which fears they’d see equal headwinds.

On Thursday, Amazon executives indicated that the e-commerce giant hadn’t seen the inflationary impacts harming different retailers. On a press call discussing Amazon’s second-quarter results, CFO Brian Olsavsky asks whether inflation changed how consumers pay their money.

“We have not seen anything yet,” Olsavsky said. “We noticed demand increase during the quarter and had a powerful June.”

Amazon made progress on bringing products back in stock, and delivery rates are essentially back to normal, Olsavsky said, after a period where a pandemic-driven flurry of online orders stressed its fulfillment and logistics operations. He recommended that consumers notice the improvement and, in turn, buy better stuff in the quarter.

Inflation-weary consumers revealed no signs of curtailing spending, but that wasn’t enough to restore growth in Amazon’s e-commerce business. Online sales refused 4% yearly as many shoppers have returned to physical stores, leading to a broader slowdown in e-commerce activity from pandemic highs.

Amazon is giving an optimistic view of the months ahead. For the current quarter, Amazon expects sales to come amid $125 billion and $130 billion, representing a growth of 13% to 17%. Analysts forecast sales of $126.4 billion, according to Refinitiv. That and revenue beating expectations sent the stock up over 13% after hours.

Amazon has a particular advantage over its rival Walmart.

On Monday, the big-box retailer said the increasing cost of groceries and gas forced consumers to tighten their belts, causing them to spend more on necessities such as food and less on electronics and apparel. That meant higher ticket items beginning to pile up on shelves. In turn, Walmart aggressively discounted unwanted items, which hurt its profit margins.

Amazon is supported by a perfect mix of middle and upper-income consumers. In contrast, Walmart is “heavily driven” by lower-income consumers, which are more susceptible to inflation, said Andrew Lipsman, principal analyst at eMarketer.

“I think Walmart at this moment in time has a much, much tighter spread and is going to be more susceptible to these impacts of inflation,” Lipsman said in an interview.

Tom Forte, an analyst at D.A. Davidson, agreed. “The core consumer at Amazon is better off than the consumer at Walmart, and that seems to be enabling it to outperform Walmart,” said Forte, who is buying Amazon shares.

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