Amazon’s profit in the third quarter of this year fell by nearly 50% compared with the same period in 2020, to $3.2 billion, driven by higher wage and shipping costs as well as a massive warehousing expansion to meet sustained demand for online shopping.
At a cost of billions, the company has nearly doubled the size of its fulfillment network since the start of the pandemic, Amazon Chief Financial Officer Brian Olsavsky said in a call with reporters Thursday. For the first time since the pandemic began, he added, “we are no longer capacity-constrained in our physical network.”
Now, supply chain blockages and the nationwide shortage of workers willing to fill lower-wage, hourly positions in sectors like retail and warehousing shortages are Amazon’s primary pressure points, Olsavsky said: Wage hikes and lost productivity cost Amazon an additional $2 billion between July and September.
The company chose to absorb those costs, and will continue to spend big on recruiting and shipping, Olsavsky said, in order to continue to serve customers — a callback to Amazon founder Jeff Bezos’s longstanding insistence on pursuing growth over profit.
Amazon anticipates spending an additional $4 billion in the last three months of this year on inducements to attract new warehouse employees and workarounds to the global shipping snarl, Olsavsky added.
“It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners,” Amazon CEO Andy Jassy said in a statement.
The company may not turn a profit next quarter, Amazon warned, issuing guidance that it expects operating income to be between $0 and $3 billion in the last three months of the year.
Amazon charted earnings per share of $6.12, underperforming analysts’ expectations of $8.92, according to analysts surveyed by Refinitiv.
Sales are holding steady, however, indicating sustained demand for e-commerce, as well as strong growth in the company’s cloud-computing and advertising segments.
The commerce giant clocked $110 billion in quarterly revenue last quarter, a 15% increase over the same time last year, and in line with analysts’ expectations. Sales of Amazon Web Services, the company’s cloud-computing division, were up 39% year over year. In Amazon’s “other” category, which includes advertising, sales rose 49% year over year.
Amazon said earlier this month that it plans to hire 150,000 seasonal U.S. workers to meet the holiday rush. The company has been dangling lucrative freebies in front of prospective workers, including signing bonuses of up to $3,000, free tuition for college and technical programs, and wages topping $20 an hour in some locations.
Those benefits seem to be working to attract new hires, Olsavsky told reporters. The company added 133,000 employees in the past three months, indicating, he said, that “in a competitive market for labor, we’re getting more than our share.” Amazon now employs roughly 1.47 million people, a 30% increase over a year ago, and plans to continue expanding. In addition to its temporary, seasonal hiring, the company aims to bring on 125,000 full-time hourly employees and has openings for 55,000 corporate and tech workers globally.
Amazon in the past year has also faced a resurgent labor movement seeking to mobilize workers in its warehouses. A resounding defeat earlier this year of a unionization drive at an Amazon warehouse in Alabama seems to have propelled efforts elsewhere. Workers at a cluster of warehouses on Staten Island in New York this week filed a petition to hold a union election. The Teamsters are attempting to unionize Amazon workers at a handful of sites in Canada.
Amazon shares fell nearly 4% after market close, to $3,312.
