Amazon, a $300 Billion Juggernaut?
Amazon told yet another American success story with its latest quarterly results, as investments in customer friendly initiatives led to more blockbuster top-line performance for the company.
Amazon’s quarterly revenue during the third quarter ended Sept. 30 grew 24% to $70 billion, the second time in its history that it has hit the $70 billion mark. At its current trajectory, Amazon is on track to generate more than $300 billion in revenue next year. That could make it the second-largest U.S. company by revenue (after Walmart).
Amazon says its obsession with customer service and massive investment in free one-day shipping is leading to more sales and more loyalty.
Amazon spent more than $800 million in each of the last two quarters to expand its free one-day delivery program and said it is expecting to spend $1.5 billion more on the initiative during the fourth quarter to expand its warehouse footprint and product assortment.
Meanwhile, Amazon’s grocery aspirations have expanded not just to include faster online delivery but also to focus on bricks-and mortar.
Since Amazon acquired Whole Foods Market in 2017, the grocer’s footprint has increased by nearly 40 stores. Earlier this month, The Wall Street Journal reported that Amazon aims to open a chain of physical grocery stores (not to include its Whole Foods and Amazon Go banners). The new physical grocery stores could number in the thousands, the Journal reported.
Amazon today operates 16 Amazon Go cashierless grocery stores, with more of those in the pipeline.
During the third quarter Amazon rolled out its Prime Now online grocery delivery and pickup program to more Whole Foods stores and now has it available in 88 cities for delivery and in 30 cities for pickup. Amazon also expanded AmazonFresh to Indianapolis, Houston, Minneapolis and Phoenix, with options for ultrafast one- and two-hour delivery. Customers in those cities can now shop from tens of thousands of grocery items, plus bestselling items from Amazon.com.
Looking to the all-important holiday quarter, Amazon said it expects to generate at least $80 billion for the first time ever during the fourth quarter. That guidance is actually below the Street’s average estimate of $87.4 billion, which sparked a selloff on Wall Street on Friday.
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder and CEO. “Customers love the transition of Prime from two days to one day — they’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers.”
Amazon’s net income during the third quarter dropped to $2.1 billion, down 26% from the year-ago period’s $2.9 billion. For the fourth quarter, Amazon is forecasting operating income to fall between $1.2 billion and $2.9 billion, also below the $4.2 billion estimate by analysts.
But Amazon not being worried about profits is another familiar story, one that shows the company’s obsession with sales growth continues despite jittery Wall Streeters. Amazon’s revenue this year is on track to climb to within half of Walmart’s annual revenue for the first time.
During the third quarter Amazon also announced The Climate Pledge, a commitment to meet the Paris Agreement 10 years early by achieving net zero carbon emissions by 2040. To support this goal, Amazon ordered 100,000 electric delivery vehicles from Rivian — the largest ever order of electric delivery vehicles — and announced plans to invest $100 million in nature-based climate solutions and reforestation projects around the world. Amazon pledged to reach 80% renewable energy by 2024 and 100% renewable by 2030.
Interestingly, Bezos addressed the company's perceived environmental impacts, which have been getting a bit of negative attention, in its third quarter fiscal report. “Although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer — it simply becomes impractical to use air or long ground routes,” he said.
Seattle-based Amazon is No. 10 on PG’s 2019 Super 50 list of the top grocers in the United States.