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Amazon reports sales and profit shortfall in 3Q

NEW YORK >> Amazon is forecasting revenue growth for the holiday quarter that is below analysts’ expectations, the latest evidence that the pandemic-induced online splurging is easing.

The disappointing forecast, announced today, comes as the Seattle-based online behemoth posted profits and revenue for the third quarter that also fell short of Wall Street estimates. Amazon also said it expects to incur several billions of dollars in extra costs in labor and other expenses as it deals with supply chain snarls and labor shortages.

“We’ve always said that when confronted with the choice between optimizing for short-term profits versus what’s best for customers over the long term, we will choose the latter — and you can see that during every phase of this pandemic,” said Andy Jassy in looking back at his first full quarter as CEO.

Jassy succeeded founder Jeff Bezos in that role in July. Bezos is now executive chairman.

Amazon is one of the few retailers that has prospered during the pandemic. As physical stores selling non-essential goods temporarily or permanently closed, people stuck at home turned to Amazon for everything from groceries to cleaning supplies. To respond to a surge in demand, the company said it nearly doubled the size of its fulfillment network since the pandemic began.

But Amazon is seeing a slowdown in sales growth as a result of the company lapping against last year’s huge pandemic-induced shopping binges. The slowdown also reflects that people, particularly in Europe and the U.S., are more mobile and are doing other things besides shopping online.

The company reported a profit of $6.2 billion, or $6.12 per share for the three-month period ended Sept. 30 compared with a profit of $6.3 billion, or $12.37 per share a share, during the year-ago period. Revenue jumped 15% to $110.8 billion.

Analysts surveyed by FactSet on average expected $111.55 billion in quarterly revenue and per-share earnings of $8.90.

In July, Amazon warned that revenue would be in the range of $106 billion to $112 billion for the third quarter. Still, the quarter marks the fourth consecutive one of revenue topping $100 billion.

Amazon’s other businesses expanded, too. Sales at its cloud-computing business, which helps power the online operations of Netflix, McDonald’s and other companies, grew 39% in the quarter. And at its unit that includes its advertising business, where brands pay to get their products to show up first when shoppers search on the site, sales rose 49%.

Amazon continues to add more businesses to its empire even as regulators around the world scrutinize the company’s business practices.

In May, Amazon announced it was buying MGM, the movie and TV studio behind James Bond, “Legally Blonde” and “Shark Tank,” with the goal of filling its video streaming service with more material to watch.

The report comes as House lawmakers are threatening to seek a criminal investigation of Amazon, saying the tech giant has a “final chance” to correct its executives’ previous testimony on its competition practices.

The lawmakers sent a letter this month to Jassy saying they were giving the company until Nov. 1 to “correct the record” and provide new documents and evidence. The missive marks an escalation in the bipartisan battle against Amazon by the House Judiciary Committee panel that has investigated the market dominance of Big Tech.

The letter says the antitrust subcommittee is considering referring the case to the Justice Department for criminal investigation. It accuses the world’s biggest online retailer of at least misleading Congress and possibly outright lying.

On Monday, the National Labor Relations Board said there was sufficient interest to form a union at an Amazon distribution center in New York, after labor organizers on Monday delivered hundreds of signatures to the agency — a key step in authorizing a vote that could establish the first union at the nation’s largest online retailer.

This is the second unionizing attempt in the past year at Amazon. Workers in Alabama resoundingly defeated an effort earlier this year, but organizers there are asking federal officials for a do-over.

The increasing worker unrest comes as Amazon is on a hiring binge. It announced in September it wants to hire 125,000 delivery and warehouse workers and is paying new recruits an average of $18 an hour in a tight job market. That’s in addition to the 150,000 seasonal workers it plans to bring on this season.

Amazon said that its sales for the fourth quarter should be between $130 billion and $140 billion, a growth of between 4% and 12% compared with fourth quarter 2020. Analysts polled by FactSet expect $142.17 billion.

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