Amazon Reports Drop in Profits, Expects Holidays Woes

Amazon recently reported a surprising drop in profits in the third quarter that it expects to continue through the holiday quarter.

Reuters reports that Amazon reported a surprising drop in profits on Thursday that it believes will continue through the holiday quarter. Amazon reportedly plans to introduce higher pay to attract workers and predicts that other operational disruptions will diminish the company’s profits from online shopping.

Amazon CEO Andy Jassy (Isaac Brekken/AP)

FILE – In this Sept. 19, 2019, file photo, Amazon CEO Jeff Bezos speaks during his news conference at the National Press Club in Washington. Amazon said Tuesday, Feb. 2, 2021, that Bezos is stepping down as CEO later in the year, a role he’s had since he founded the company nearly 30 years ago. (AP Photo/Pablo Martinez Monsivais, File)

Amazon saw its net income fall by around 50 percent to $3.16 billion at the end of the third quarter, a first major drop in profits for the company since the start of the coronavirus pandemic. Amazon CEO Andy Jassy said in a statement that Amazon is dealing with higher shipping costs, increases wages, and worker shortages. These issues combined with lost productivity and cost inflation added $2 billion to the company’s expenses in the quarter.

Amazon delivery driver ( PATRICK T. FALLON /Getty)

It seems that these problems are expected to extend through the holiday season. Jassy stated that Amazon is “doing whatever it takes to minimize the impact on customers and selling partners this holiday season.” He added: “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

Amazon has posted impressive financial results for the past year but may be facing tougher times ahead. It has boosted the average U.S. warehouse pay to $18 per hour and marketed larger signing bonuses to attract more blue-collar staff that the company needs to keep its high-turnover business running.

Amazon is also dealing with global supply chain challenges and claims to have doubled its container processing ability. The company has expanded its delivery partner program and ramped up its warehouse investments, all of which are extremely expensive. The company expects operating profit for the current quarter to be between $0 and $3.0 billion, much less than the $6.9 billion the company posted at the same time last year.

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