Amazon profits nearly double as company ups Prime membership price – CNET
Amazon said in October it expected increased labor and logistics costs to bring challenges to the final quarter of 2021.
Getty ImagesAmazon’s 2021 holiday shopping season was expected to be a slowdown from a blockbuster performance a year earlier. On Thursday, the company’s fourth-quarter earnings showed consumers didn’t pump the brakes as much as expected on buying, even as supply chain issues weighed on retail. The company defied analysts’ expectations and its own predictions, turning a profit of $14.3 billion.
In October, Amazon forecast declining profits, citing increased labor and logistics costs needed to keep its promise of fast deliveries. Instead, net sales in the October-December quarter rose 9% to $137.4 billion, just missing the average of $137.56 billion that analysts had expected, according to Yahoo. Earnings per share almost doubled to $27.75 from $14.09 the prior year. This trounced analysts’ forecasts of $3.48 for earnings per share.
In a call with reporters, Amazon Chief Financial Officer Brian Olsavsky pointed to the IPO of Rivian, an electric vehicle maker that Amazon had invested in, as a major boost to net income. Operating income fell to $3.5 billion in the fourth quarter from $6.9 billion in the previous year, which Olsavsky attributed to the increased labor and logistics costs that Amazon had expected to hit its profits in the last three months of the year.
The company on Thursday also said it will raise the price of its Amazon Prime membership. Olsavsky said the decision to raise the price in the first part of 2022 will help offset increasing labor and logistics costs in the future. The monthly price will grow from $12.99 to $14.99, and an annual membership will go up from $119 to $139. Olsavsky also pointed to increased investment in Prime Video content, including an upcoming Lord of the Rings prequel series and a Thursday Night Football deal with the NFL.
The e-commerce giant had warned in October that the fourth quarter would likely be tough because of an increasingly tight labor market. Amazon has significantly built out its warehouse space since the beginning of the pandemic, but says it hasn’t been able to fully staff those places. As a result, it’s offering workers increased starting wages in addition to hiring bonuses. It’s also paying more to move orders to fully staffed warehouses to get them to customers’ doors on time.
While the issue didn’t impact profits the way Amazon predicted, the company still faces labor issues. Amazon workers are pushing back on expectations that they say have them working too hard without enough rest to recover. The earnings report comes a day before a union vote kicks off for workers at a warehouse in Alabama. Warehouse workers in New York are also trying to unionize.
The earnings report is an improvement after a run of weak performances by Amazon. Profits were halved in the third quarter for the same labor and logistics reasons. Sales slowed a quarter earlier despite the company moving its Prime Day discount holiday to June last year.
The earnings report comes a year after Jeff Bezos said he would hand over the role of CEO to longtime Amazon insider Andy Jassy, who ran the company’s cloud computing operations at the time. Jassy took over in July, just as Amazon entered a period of slipping sales and profits.
Like other Big Tech companies, Amazon is facing increasing regulatory scrutiny over labor and antitrust issues.
