Wed. Jul 6th, 2022

Amazon has revealed it is to raise the cost of its Prime membership for customers in its core US market to offset rising costs while reporting a leap in sales and profits.

The e-commerce, cloud data storage and entertainment giant said the annual fee for its 200 million US members, which covers shopping deliveries and its streaming service, would go up for the first time in four years from $119 currently to $139 – a rise of almost 17%.

It made the announcement as companies globally battle a surge in costs related to the COVID pandemic, which has forced up shipping costs and wages through labour shortages.

Amazon probably secured the confidence to impose the increase after net income during the final quarter of its financial year, which includes Black Friday and Christmas, almost doubled to $14.3bn compared to the same period last year despite a slowdown in revenue growth.

Amazon founder Jeff Bezos speaking at the Leaders' Action on Forests and Land-use event during the Cop26 summit at the Scottish Event Campus (SEC) in Glasgow. Picture date: Tuesday November 2, 2021.
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Jeff Bezos relinquished day-to-day-control of the business earlier this year

The same measure of profitability covering 2021 as a whole came in at $33.4bn – a rise of more than 50% – on sales of $469.8bn. Revenue was 22% up on an annual basis and by 9% in the fourth quarter.

However, its forecasts for the current January-to-March quarter came in below analysts’ expectations.

Amazon blamed the continuing inflationary environment.

Chief executive Andy Jassy said: “As expected over the holidays, we saw higher costs driven by labor supply shortages and inflationary pressures, and these issues persisted into the first quarter due to Omicron.

“Despite these short-term challenges, we continue to feel optimistic and excited about the business as we emerge from the pandemic.”

A worker sorts parcels at Amazon's fulfilment centre in Peterborough, Britain November 15, 2017. REUTERS/Darren Staples
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Amazon thanked its workers for handling a second Christmas under the cloud of COVID

It released the update on its performance following a horror show for many tech stocks on Wall St earlier in the day that saw Amazon lose more than 7%.

The sell-off was stoked by results from Facebook owner Meta 24 hours earlier that had warned of headwinds ahead on several fronts including hits to advertising demand and threats from competition.

Meta shares ended the day almost 27% down, which took more than $220bn off its market cap.

The so-called FAANG group of Facebook, Amazon, Apple, Netflix and Google’s Alphabet has collectively lost more than $500bn in market value during 2022 to date.

Much of that has been attributed to valuations being called into question at a time of looming US central bank action against inflation that will see the taps of cheap credit for financial markets being turned off completely in March.

Amazon’s shares were 16% lower in the year to date at the market close but recovered that decline after the bell – surging by 17% in extended trading.

Analysts credited its decision to raise Prime membership fees for the lift.

The company made no mention of a similar move in the UK and is due to reveal its UK sales figures on Friday morning.

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