Amazon (AMZN) – Get Report shares edged higher Monday as the world’s biggest online retailer launched its 2021 “Prime Day” shopping event amid a pullback in retail sales and a slower-than-expected recovery in the job market.
Amazon, which brought its seventh annual two-day shopping event forward this year in the hope of sparking a spending boost amid a traditionally quiet June, is also facing intense competition from online rivals such as Target (TGT) – Get Report and Walmart (WMT) – Get Report for a slice of the $10 billion in gross merchandise volumes it booked last year.
That could be a tough ask for all three — as well as the smaller retailers looking to offer heavy discounts to online shoppers over the next 48 hours — as U.S. consumers continue to tighten their belts heading into the summer months as gas prices rise firmly past the $3 per gallon mark and the tailwind from the $1,200 checks linked to the American Rescue Act fades and consumer prices surge the most in more than a decade.
May retail sales fell by a more-than-expected 1.3% to a collective $620.2 billion, the Commerce Department said last week, as headline CPI was pegged at 5%, the highest since 2008.
Job growth is also sputtering, with non-farm payroll tallies for both April and May falling well below Wall Street forecasts and JOLTS job openings showing the largest unfilled positions total — 9.3 million — on record.
Still, JPMorgan analysts still expect gross merchandise value (GMV) to rise 10.4% from last year to around $11.6 billion, a figure that would add around $6 billion in revenue to Amazon’s overall second quarter tally.
“Prime Day’s financial benefit also extends far beyond the 2-day period through the conversion of new Prime subs & addition of third-party sellers to the platform,” said JPMorgan analyst Doug Anmuth, adding the company can also use the event to gauge back-to-school and second half shopping demand.
“We believe this is important given Amazon may not be fully back to normal pre-pandemic delivery times, which places more pressure on AMZN & third-party delivery networks,” he added.
Amazon shares were marked 0.26% higher in pre-market trading Monday to indicate an opening bell price of $3,496.00 each. a move that would peg the stock’s year-to-date gain at around 7.3%.
Amazon isn’t taking any chances with this year’s two-day event, however, and moved to add some 75,000 new jobs across its fulfillment and transportation divisions last month, while boosting pay by between 50 cents and $3 per hour for its 500,000-strong workforce.
It’s also increased its fulfillment center square footage by more than 50% from last year’s levels.
Amazon is forecasting operating income of between $4.5 billion to $8 billion for the current quarter, on revenues in the range of $110 billion to $116 billion, following a first quarter blowout that included net income of $15.79 per share, more than triple last year’s $5.01 total and revenues of $108.5 billion.
Amazon Web Services, the group’s market-leading cloud business, saw net sales rise 32.1% to $13.5 billion, falling shy of the 50% gains recorded by rival Microsoft’s (MSFT) – Get Report Azure business earlier this week.
Physical store sales, Amazon said, fell 15.5% to $3.92 billion, while third-party seller services sales surged 63% to $23.709 billion. Online store sales rose 44.3% to $52.9 billion.