com shareholders have just verified another reality
The surprising inability of the two major US retailers to withstand inflationary pressures সাথে with increasing evidence of weakening shopping behavior অর্থ means that the road to recovery for Amazon’s (Ticker: AMZN) e-commerce business may become more difficult.
They had their worst one-day fall since October 1987 after reporting earnings per share (WMT). One day later
) Followed suit by 26% fall since its results — Also tracking its biggest fall since 1987.
The disappointing quarterly numbers have shocked investors, with both companies reporting sinking profitability, growing inventory and increased markdown. Walmart and Target were also uncertain when product, energy inflation would rise and their supply chain would end.
Outside of the numbers, there were ominous signs of consumer conditions and how pocketbooks were being suppressed – especially for working families. Walmart says it has seen buyers switch from gallons of milk to half-gallons and from brand names to cheaper private-label products. Walmart CEO Doug Macmillan says food inflation is doubling and he is concerned that it will continue to rise.
And then there is the transfer of costs to services Target says shoppers are re-focusing on purchases from larger physical items, such as appliances and televisions, towards the restaurant’s “going out” experience, such as gift cards. This could mean that consumers have already spent most of their time on electronics, home appliances and furniture during the epidemic. Since most of these items do not need to be upgraded or replaced year after year, this can lead to continued slow sales.
All this bodes badly for Amazon. Like Walmart and Target, the technology giant is vulnerable to the limitations of the physical world. With 1.6 million employees worldwide, its operations require a huge scale. So it will be most affected by the continued inflationary pressures from wages and full costs to shipping. And if consumers continue to spend less on physical products, Amazon’s revenue will suffer.
Shares of Amazon fell 7.6% to $ 2,131.65, in recent transactions, as the market digested the results.
Of course, last month, Amazon’s disappointing earnings report cited inflation and overcapacity. The problems are not entirely new. But the number of retailers reveals that things can get worse at a faster pace. Target management said it did not anticipate how quickly the inflationary environment had deteriorated in the past two months.
Amazon did not immediately respond to requests for comment from Walmart and Target for the company’s impact.
Late last month, Amazon founder Jeff Bezos warned that when the “bull race” in technology ends, “lessons can be painful.” At the time, it was refreshing to hear Bezos speak frankly, warning technology entrepreneurs to be prepared for the dark times ahead.
But now, he seems to be talking about the company he founded.
Enter Tae Kim at [email protected]