Amazon sees no slowdown in consumer demand as shares jump 13%

Amazon.com Inc on Thursday said it expects a jump in third-quarter revenue, as the retailer collects bigger fees from Prime loyalty subscriptions and as consumer demand has ramped up in spite of inflation. Shares of the world's largest online retailer rose 13% in trading after the bell, extending its market valuation by more than $150 billion.

Amazon, like much of the retail industry, is facing a reckoning. Major rival Walmart Inc this week said it would make much less this year than it once expected. U.S. consumer confidence has tumbled to a recent low, and some are sticking to lower-priced essentials to manage economic woes. That has not stopped Amazon. The online retailer projected net sales between $125 billion and $130 billion for the summer period, while analysts were expecting only $126.42 billion, according to IBES data from Refinitiv.

In a press release, Chief Executive Andy Jassy said the company is "seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year." Operating at a higher level, Amazon had more goods in stock than it did before the COVID-19 pandemic started in early 2020, Chief Financial Officer Brian Olsavsky told reporters on a conference call.

Amazon about doubled how many items it could deliver just a day after purchase, making progress on a long-term commitment, according to press releases. Its July marketing event Prime Day was the biggest ever by unit sales. BUYING PATTERNS

Asked about Walmart and changes in consumer buying patterns, Olsavsky said, "We did not notice a step down in June." The rosier-than-expected sales outlook nonetheless comes at a precarious moment for the Seattle-based retailer. A changing of the guard has heralded the departures of Consumer CEO Dave Clark and corporate affairs head Jay Carney, as well as two of the company's most senior Black executives. A period of record profit gave way in the first quarter of 2022 to Amazon's first quarterly loss in seven years.

Ultimately, Amazon lost $2 billion in the just-ended second quarter, including a pre-tax valuation loss of $3.9 billion from its investment in Rivian Automotive Inc. But the company beat expectations in posting operating income of $3.3 billion, relative to the $1.8 billion analysts expected, according to research firm FactSet. The company's extra costs from inflation, productivity and other items were $4 billion in the second quarter, in line with its expectations and about $2 billion less than it faced at the year's outset, Olsavsky said.

After racing to match demand during the height of the pandemic, doubling its fulfillment network in just two years, the company has started slowing warehouse openings to rein in costs. It has paused a major office space expansion in Bellevue, Washington, and it has not filled roles that became vacant in some facilities, lowering its full and part-time headcount from the March quarter. It has raised some prices, too. After increasing U.S. fees for fast-shipping club Prime, Olsavsky said subscription retention was as good or better than the company expected.

Cloud-computing division Amazon Web Services beat expectations, too. The unit posted revenue of $19.7 billion, ahead of the more than $19.5 billion analysts had estimated Amazon would collect for the second quarter. "It looks like Amazon is finally primed to turn the corner after a rocky couple of quarters," Insider Intelligence analyst Andrew Lipsman said.

Adjusting for items, Amazon reported earnings per share of 18 cents, above the consensus for a per share profit of 13 cents, according to IBES data from Refinitiv.