WEBVTT - Instant Reaction: Amazon Gives Weak Forecast on Trade Concerns

0:00:02.520 --> 0:00:07.040
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

0:00:09.200 --> 0:00:13.840
<v Speaker 2>This is a breaking news update from Bloomberg instant reaction

0:00:14.120 --> 0:00:17.919
<v Speaker 2>and analysis from our three thousand journalists and analysts around

0:00:18.000 --> 0:00:21.079
<v Speaker 2>the world. I'm looking at shares of Amazon in the

0:00:21.079 --> 0:00:24.279
<v Speaker 2>after hours. One number that really sticks out to everybody.

0:00:24.360 --> 0:00:28.600
<v Speaker 2>Second quarter operating income outlook MISSUS thirteen billion dollars to

0:00:28.640 --> 0:00:31.159
<v Speaker 2>seventeen and a half billion dollars. The estimate was for

0:00:31.280 --> 0:00:34.720
<v Speaker 2>seventeen point eight two billion dollars. Let's get into it

0:00:34.720 --> 0:00:37.159
<v Speaker 2>with Caroline Hyde. She's the co host of Bloomberg Technology

0:00:37.159 --> 0:00:39.800
<v Speaker 2>on Bloomberg TV. Each day at eleven Wall Street time.

0:00:40.040 --> 0:00:44.040
<v Speaker 2>She joins us here in the Bloomberg Interactive Brokers studio. Caroline,

0:00:44.479 --> 0:00:48.240
<v Speaker 2>typically we'd be talking about AWS in any other quarter.

0:00:48.440 --> 0:00:49.880
<v Speaker 3>That's crazy, that's not at all.

0:00:50.080 --> 0:00:52.360
<v Speaker 2>I mean, for years, that's what we do AWS, that's

0:00:52.360 --> 0:00:54.480
<v Speaker 2>what we care about. That's where the margins are. But

0:00:54.600 --> 0:00:57.360
<v Speaker 2>then you have Liberation Day, so called Liberation Day, and

0:00:57.440 --> 0:01:00.840
<v Speaker 2>now all anybody cares about is who's paying for these tariffs?

0:01:01.080 --> 0:01:03.520
<v Speaker 1>But I suppose there's also still the focus on margins.

0:01:03.560 --> 0:01:05.640
<v Speaker 1>The reason we care so much about AWS is it's

0:01:05.720 --> 0:01:08.000
<v Speaker 1>the profit driver, right, But we're now worrying about a

0:01:08.000 --> 0:01:11.160
<v Speaker 1>profit issue here with an operating income number coming in

0:01:11.200 --> 0:01:15.160
<v Speaker 1>well below expectations, that breadth of guidance that they give

0:01:15.240 --> 0:01:18.160
<v Speaker 1>us that almost like four billion wiggle room that's very normal.

0:01:18.520 --> 0:01:22.800
<v Speaker 2>Is that operating income guidance is hit? Is that due

0:01:22.800 --> 0:01:25.520
<v Speaker 2>to tariffs or is it due to competition? When it

0:01:25.520 --> 0:01:27.400
<v Speaker 2>comes to AWS, I think.

0:01:27.280 --> 0:01:30.000
<v Speaker 1>You have to work out also whether it's infrastructure spend Look,

0:01:30.240 --> 0:01:32.200
<v Speaker 1>what happened with Meta was that they said, look, we're

0:01:32.200 --> 0:01:33.600
<v Speaker 1>going to have to be spending more on our capital

0:01:33.640 --> 0:01:35.640
<v Speaker 1>expenditure because the infrastructure costs are going to be a

0:01:35.680 --> 0:01:38.240
<v Speaker 1>little bit higher. But profitability over mo'all is going to

0:01:38.240 --> 0:01:41.600
<v Speaker 1>be sucked up by what ultimately they're going to have

0:01:41.640 --> 0:01:43.920
<v Speaker 1>to pay for From a margin perspective, is it that

0:01:44.000 --> 0:01:46.480
<v Speaker 1>they suck up some of the margin hit themselves to

0:01:46.560 --> 0:01:49.800
<v Speaker 1>keep the consumer, which is in a vulnerable position, keep

0:01:49.840 --> 0:01:52.559
<v Speaker 1>coming back to Amazon? Is it also that the third

0:01:52.640 --> 0:01:54.960
<v Speaker 1>party sellers are going to be retrenching a little bit more?

0:01:55.000 --> 0:01:56.960
<v Speaker 1>What was going to be happening to advertising? Because they

0:01:57.000 --> 0:01:59.960
<v Speaker 1>did really well on advertising. But if you're seeing from

0:02:00.000 --> 0:02:02.040
<v Speaker 1>some of these snap and the likes of others talking

0:02:02.040 --> 0:02:06.080
<v Speaker 1>about the Chinese retailers, no longer wanting to be overall

0:02:05.880 --> 0:02:08.400
<v Speaker 1>spending on advertising. Is that going to be taking in

0:02:08.520 --> 0:02:12.079
<v Speaker 1>terms of the overall margin generation? And ultimately what does

0:02:12.120 --> 0:02:14.120
<v Speaker 1>this mean in terms of how much a WS and

0:02:14.160 --> 0:02:17.520
<v Speaker 1>its strength being able to prop up ultimately an e

0:02:17.520 --> 0:02:19.600
<v Speaker 1>commerce side of the business that has to suck up

0:02:19.840 --> 0:02:21.440
<v Speaker 1>a margin hit if they're going to be able to

0:02:21.480 --> 0:02:22.360
<v Speaker 1>keep the consumer coming.

0:02:22.400 --> 0:02:24.240
<v Speaker 4>We were kind of blown away, and I mean I

0:02:24.280 --> 0:02:27.000
<v Speaker 4>went through the press release really quickly. I didn't see tariffs.

0:02:27.200 --> 0:02:28.880
<v Speaker 4>Alex mentioned one, but it was kind of in the

0:02:29.080 --> 0:02:32.280
<v Speaker 4>you know, the disclosure, like they didn't seem to touch it,

0:02:32.360 --> 0:02:36.680
<v Speaker 4>and you can as touch it.

0:02:36.639 --> 0:02:41.640
<v Speaker 1>Not touch it, even use the word tariff as a

0:02:41.639 --> 0:02:44.919
<v Speaker 1>CFO of meta. They at least put tariff and trade policies,

0:02:44.919 --> 0:02:47.799
<v Speaker 1>which are the only new lines in that forward looking

0:02:47.840 --> 0:02:48.840
<v Speaker 1>guidance paragraph.

0:02:48.960 --> 0:02:50.560
<v Speaker 3>All right, so but you know that's going to be

0:02:50.600 --> 0:02:51.200
<v Speaker 3>top of mind.

0:02:51.960 --> 0:02:54.760
<v Speaker 4>I know it's like kind of amazing, but I get it,

0:02:54.800 --> 0:02:55.280
<v Speaker 4>I get it.

0:02:55.560 --> 0:02:56.320
<v Speaker 3>I mean I.

0:02:56.280 --> 0:02:59.239
<v Speaker 4>Don't know what what kind of color can we expect

0:02:59.240 --> 0:02:59.480
<v Speaker 4>from them.

0:02:59.520 --> 0:03:01.880
<v Speaker 3>I think there's so speculation. I mean, will they be

0:03:01.960 --> 0:03:05.560
<v Speaker 3>able to really pinpoint the cost? What are they seeing

0:03:05.560 --> 0:03:06.600
<v Speaker 3>at this point? Caroline?

0:03:06.639 --> 0:03:09.760
<v Speaker 1>Because I think Andy Jesse did give an interview earlier

0:03:09.760 --> 0:03:11.720
<v Speaker 1>in the month, well earlier in last month now and

0:03:11.760 --> 0:03:14.040
<v Speaker 1>in April. Isn't it mad that it's made?

0:03:14.080 --> 0:03:16.000
<v Speaker 3>But it's crazy looking back.

0:03:15.840 --> 0:03:17.440
<v Speaker 1>And really he was saying, look, there's going to be

0:03:17.480 --> 0:03:20.079
<v Speaker 1>horses for courses, there are some negotiations that were in

0:03:20.120 --> 0:03:22.679
<v Speaker 1>the midst of and yes, maybe we start to try

0:03:22.680 --> 0:03:26.280
<v Speaker 1>and push back and ask for ultimately the ultimate seller

0:03:26.560 --> 0:03:29.560
<v Speaker 1>the Chinese celler. Remember, Amazon gets about seventy percent of

0:03:29.600 --> 0:03:32.560
<v Speaker 1>its products from China, whether they're selling them on their

0:03:32.600 --> 0:03:35.480
<v Speaker 1>own platform, whether they're selling them via third parties, and

0:03:35.560 --> 0:03:37.280
<v Speaker 1>so are they going to pass that off on them

0:03:37.320 --> 0:03:39.680
<v Speaker 1>if they're in the midst of a negotiation, maybe they do.

0:03:40.120 --> 0:03:42.320
<v Speaker 1>But otherwise, if they're still got they've got the contract

0:03:42.360 --> 0:03:44.400
<v Speaker 1>already existing, they're going to have to suck it up

0:03:44.440 --> 0:03:45.480
<v Speaker 1>a little bit themselves.

0:03:45.520 --> 0:03:46.680
<v Speaker 3>And we certainly know.

0:03:47.080 --> 0:03:49.000
<v Speaker 1>That they're not going to be making evident how much

0:03:49.080 --> 0:03:51.119
<v Speaker 1>the tariff is going to be adding to their prices.

0:03:51.160 --> 0:03:53.520
<v Speaker 4>How do you roll that into right, that's the report

0:03:53.600 --> 0:03:56.840
<v Speaker 4>that they.

0:03:55.400 --> 0:03:59.240
<v Speaker 3>Were they really considering. I'm sure a lot of these things.

0:03:59.240 --> 0:04:01.520
<v Speaker 1>That's the same with the as the story, and potentially

0:04:01.560 --> 0:04:03.400
<v Speaker 1>maybe they have to consider a new CEO. At some

0:04:03.400 --> 0:04:05.680
<v Speaker 1>point there's probably new smoke without far I'm pretty sure

0:04:05.720 --> 0:04:08.160
<v Speaker 1>at some point the whole side of the business now

0:04:09.280 --> 0:04:14.280
<v Speaker 1>sheans well and were making it evident how much twerffs

0:04:14.280 --> 0:04:16.960
<v Speaker 1>are increasing. So probably you went internally, oh boy, that's

0:04:16.960 --> 0:04:19.760
<v Speaker 1>what they're doing. Maybe we should consider something similar. But

0:04:19.800 --> 0:04:21.880
<v Speaker 1>at no point was this signed off, and no point

0:04:22.000 --> 0:04:24.039
<v Speaker 1>was this run up the ladder and them going oh yeah,

0:04:24.080 --> 0:04:27.000
<v Speaker 1>if you go, stop making evidence. So I'm pretty sure

0:04:27.000 --> 0:04:29.360
<v Speaker 1>that they are clear that this was not signed off,

0:04:29.560 --> 0:04:31.800
<v Speaker 1>this was not agreed, But they have to be disive

0:04:31.960 --> 0:04:33.600
<v Speaker 1>to consider it to be foolish not.

0:04:33.560 --> 0:04:36.040
<v Speaker 2>To Amazon at least find it find itself in the

0:04:36.080 --> 0:04:38.440
<v Speaker 2>position that this is not a story that's unique to Amazon.

0:04:38.480 --> 0:04:41.040
<v Speaker 2>From the perspective of a retailer, a company such as

0:04:41.040 --> 0:04:43.440
<v Speaker 2>Walmart and Target would have to go through the same thing.

0:04:43.600 --> 0:04:44.039
<v Speaker 1>So true.

0:04:44.080 --> 0:04:47.640
<v Speaker 2>What is different though, is Amazon's exposure for its cloud business.

0:04:47.680 --> 0:04:49.400
<v Speaker 2>So we can't look at Microsoft as sort of a

0:04:49.400 --> 0:04:52.840
<v Speaker 2>pure play comparison to Amazon anymore, or even Google Cloud.

0:04:54.279 --> 0:04:56.919
<v Speaker 2>What does it mean that that Amazon it kind of

0:04:56.920 --> 0:04:59.240
<v Speaker 2>doesn't matter if they have to raise prices to the

0:04:59.279 --> 0:05:02.440
<v Speaker 2>extent of competition coming in and saying, you know, we

0:05:02.440 --> 0:05:05.680
<v Speaker 2>can get this product for cheaper for elsewhere. Because if

0:05:05.760 --> 0:05:08.600
<v Speaker 2>Amazon's prices go up from their suppliers I'm talking physical

0:05:08.640 --> 0:05:11.520
<v Speaker 2>goods here that are sold through the retail site, everybody's

0:05:11.520 --> 0:05:13.440
<v Speaker 2>prices are going to go up too. And that just means,

0:05:13.839 --> 0:05:16.680
<v Speaker 2>you know, as American consumers who buy this stuff, we're

0:05:16.680 --> 0:05:17.440
<v Speaker 2>the ones who are going to.

0:05:17.440 --> 0:05:17.960
<v Speaker 5>Have to be paying.

0:05:18.440 --> 0:05:22.240
<v Speaker 1>And that is trying to be what's told to the

0:05:22.240 --> 0:05:24.880
<v Speaker 1>consumer base right now. Evidently this is going to be

0:05:24.920 --> 0:05:27.480
<v Speaker 1>an inflationary pressure bag of American security is ahead of

0:05:27.480 --> 0:05:29.840
<v Speaker 1>these numbers, put it really well, but basically, you know

0:05:29.880 --> 0:05:32.600
<v Speaker 1>it's going to be the biggest focus is tariffs, and

0:05:33.080 --> 0:05:36.640
<v Speaker 1>given that everyone's in the same boat, ultimately you're going

0:05:36.720 --> 0:05:39.640
<v Speaker 1>to have the bet a little bit that Amazon's going

0:05:39.680 --> 0:05:42.240
<v Speaker 1>to weather this better than anyone else. They've got the

0:05:42.360 --> 0:05:46.680
<v Speaker 1>cash on the balance sheet, They've got potential ability to

0:05:46.760 --> 0:05:49.520
<v Speaker 1>stomach some of the margin hit, much more so than

0:05:49.560 --> 0:05:52.640
<v Speaker 1>a Wayfair or some others that are offering e commerce

0:05:53.000 --> 0:05:55.320
<v Speaker 1>out there. And so yeah, Amazon is the one, perhaps

0:05:55.360 --> 0:05:58.640
<v Speaker 1>in this difficult situation that you build on to write

0:05:58.680 --> 0:05:59.240
<v Speaker 1>out the storm.

0:05:59.279 --> 0:06:02.920
<v Speaker 4>But there's always the side too, because you know, the

0:06:03.120 --> 0:06:05.839
<v Speaker 4>sev seventy percent of their goods, right, they come from China,

0:06:06.080 --> 0:06:10.440
<v Speaker 4>whether it's directly or through you know, they employ Chinese workers, right,

0:06:10.480 --> 0:06:13.039
<v Speaker 4>So I'm just curious, like, what's the Chinese perspective on

0:06:13.120 --> 0:06:15.640
<v Speaker 4>Amazon and the importance it is to their economy?

0:06:16.000 --> 0:06:19.000
<v Speaker 3>Do you mean everything of you know what? I don't know?

0:06:19.040 --> 0:06:22.320
<v Speaker 1>And that's the key question for Shijingping is that ultimately

0:06:22.360 --> 0:06:24.640
<v Speaker 1>how much do they have to support their own economy

0:06:24.640 --> 0:06:28.120
<v Speaker 1>support some of their exporters at this moment. And I'm

0:06:28.120 --> 0:06:30.760
<v Speaker 1>pretty sure that China has decided that they're going to

0:06:30.800 --> 0:06:33.080
<v Speaker 1>fight fire with fire in many ways and decide that.

0:06:33.120 --> 0:06:34.480
<v Speaker 3>If you want to cut us off so bit.

0:06:34.680 --> 0:06:37.160
<v Speaker 1>But I think Amazon is the one in the position

0:06:37.240 --> 0:06:40.920
<v Speaker 1>here that has to help with the renegotiations, has to

0:06:41.000 --> 0:06:43.719
<v Speaker 1>stomach some of the margin hit in because we don't

0:06:43.720 --> 0:06:45.400
<v Speaker 1>know where this is going for the next few months.

0:06:45.640 --> 0:06:47.800
<v Speaker 1>At the moment, they're facing one hundred and forty five

0:06:48.640 --> 0:06:50.599
<v Speaker 1>and twenty five percent tariff, right, Where does it go

0:06:50.640 --> 0:06:53.400
<v Speaker 1>from here? How much are they able to change supply chains?

0:06:53.560 --> 0:06:56.040
<v Speaker 1>So in the interim they probably stuck up the margin hit.

0:06:56.080 --> 0:06:58.600
<v Speaker 1>In the longer term, how do they start to change

0:06:58.880 --> 0:07:01.240
<v Speaker 1>as we've seen with Apple. Oh, Suddenly a lot of

0:07:01.279 --> 0:07:03.440
<v Speaker 1>my goods are coming from India now, which other countries

0:07:03.480 --> 0:07:06.000
<v Speaker 1>start to benefit. But you're right, what is their relationship

0:07:06.120 --> 0:07:08.760
<v Speaker 1>like with their supplies? How are they trying to make things?

0:07:09.480 --> 0:07:10.160
<v Speaker 3>What things?

0:07:10.280 --> 0:07:13.560
<v Speaker 1>That's interesting with Amazon always they're not afraid to disappoint

0:07:13.560 --> 0:07:14.920
<v Speaker 1>investors on profit point.

0:07:15.360 --> 0:07:17.080
<v Speaker 3>They're sales. They're actually looking for it.

0:07:18.800 --> 0:07:23.640
<v Speaker 1>The Decade podcast is good and resilient for sales. It's

0:07:23.680 --> 0:07:26.360
<v Speaker 1>just they're saying, sorry, guys, suck up the operating margin.

0:07:26.440 --> 0:07:28.640
<v Speaker 4>Hit the stack is now, I mean still down two percent,

0:07:28.680 --> 0:07:30.320
<v Speaker 4>but it's not down for a five percent which it

0:07:30.360 --> 0:07:30.720
<v Speaker 4>was before.

0:07:30.720 --> 0:07:32.920
<v Speaker 3>It hasn't started, no, true.

0:07:32.760 --> 0:07:35.280
<v Speaker 1>And they're talking all about the innovations. They're talking about

0:07:35.280 --> 0:07:37.400
<v Speaker 1>the satellite side of the business. They're talking about putting

0:07:37.440 --> 0:07:39.800
<v Speaker 1>sacks as an offering on the e commerce site. They're

0:07:39.840 --> 0:07:42.160
<v Speaker 1>talking about what you can get in terms of AI

0:07:42.240 --> 0:07:45.280
<v Speaker 1>innovations if you're coming to their cloud computing. Also their

0:07:45.280 --> 0:07:47.560
<v Speaker 1>foundational models that they're going to aim at consumers too.

0:07:47.720 --> 0:07:49.600
<v Speaker 1>They've got their own chips. They're going to try and

0:07:49.640 --> 0:07:51.960
<v Speaker 1>talk up the resiliency of their business model when in

0:07:52.000 --> 0:07:54.280
<v Speaker 1>the interim, yes, they might going to have to pass

0:07:54.320 --> 0:07:55.800
<v Speaker 1>on some cost to the consumer base and the e

0:07:55.880 --> 0:07:58.239
<v Speaker 1>commerce but the lag is somewhat It's.

0:07:58.080 --> 0:08:00.320
<v Speaker 4>Just like, as you said, amazing, we would normally just

0:08:00.400 --> 0:08:01.520
<v Speaker 4>like all of our AGAs.

0:08:01.600 --> 0:08:04.200
<v Speaker 2>That's what we just kind of carried about. Caroline, you

0:08:04.280 --> 0:08:06.400
<v Speaker 2>got to go TV as calling. They want to talk

0:08:06.440 --> 0:08:09.280
<v Speaker 2>to you. Caroline is the co host of Bloomberg Technology

0:08:09.280 --> 0:08:12.960
<v Speaker 2>on a Bloomberg TV eleven o'clock Wall Street time. Let's

0:08:12.960 --> 0:08:15.480
<v Speaker 2>go continue on Amazon, specifically on the retail side. I

0:08:15.520 --> 0:08:17.480
<v Speaker 2>want to bring on Punham Gooyle, senior analyst for e

0:08:17.480 --> 0:08:21.280
<v Speaker 2>commerce at Leisure off Price Retail for Bloomberg Intelligence. She

0:08:21.360 --> 0:08:24.720
<v Speaker 2>JOINSU from New York City this afternoon. Let's talk about

0:08:24.720 --> 0:08:27.360
<v Speaker 2>this miss when it comes to second quarter operating income.

0:08:27.520 --> 0:08:30.720
<v Speaker 2>The outlook there is that a result of tariffs. In

0:08:30.760 --> 0:08:32.440
<v Speaker 2>your view, it.

0:08:32.360 --> 0:08:34.559
<v Speaker 5>Has to be, because when I think about the operating

0:08:34.600 --> 0:08:37.920
<v Speaker 5>margin that they just posted with AWS, you know, incredible

0:08:38.000 --> 0:08:41.760
<v Speaker 5>near forty percent. The downside that we're seeing going into

0:08:41.760 --> 0:08:44.480
<v Speaker 5>two Q, I can't think of anything else that could

0:08:44.480 --> 0:08:46.720
<v Speaker 5>be driving that than higher costs that they'll have to

0:08:46.760 --> 0:08:49.240
<v Speaker 5>absorb due to the tariffs.

0:08:49.480 --> 0:08:51.880
<v Speaker 4>Are you surprised that, like we kind of you know,

0:08:52.240 --> 0:08:55.679
<v Speaker 4>went through that press release, there's really nothing on tariffs.

0:08:55.720 --> 0:08:57.800
<v Speaker 4>There's like that disclosure that kind of dumps everything at

0:08:57.800 --> 0:09:00.640
<v Speaker 4>the very bottom of the page. Not surprise to see

0:09:00.640 --> 0:09:02.760
<v Speaker 4>that they didn't really address it in the release, and

0:09:02.800 --> 0:09:04.320
<v Speaker 4>I guess it's all going to come out on the call.

0:09:05.440 --> 0:09:06.599
<v Speaker 5>Yeah, I think there's going to be a lot of

0:09:06.679 --> 0:09:09.000
<v Speaker 5>questions about tariffs. Keep in mind that you know, Amazon

0:09:09.040 --> 0:09:11.960
<v Speaker 5>is directly exposed on the one P side, so roughly

0:09:12.040 --> 0:09:14.040
<v Speaker 5>forty percent of its business is where they do have

0:09:14.120 --> 0:09:17.079
<v Speaker 5>to deal with tariffs. The other sixty percent, that's three

0:09:17.200 --> 0:09:20.439
<v Speaker 5>P the sellers have to deal with them, but Amazon

0:09:20.679 --> 0:09:23.199
<v Speaker 5>helps you set the price on its platform to make

0:09:23.200 --> 0:09:25.720
<v Speaker 5>it competitive. So there's just a lot of back and

0:09:25.720 --> 0:09:28.160
<v Speaker 5>forth that's going on, and with some suppliers they are

0:09:28.240 --> 0:09:30.760
<v Speaker 5>working one on one to see where they can help

0:09:30.920 --> 0:09:35.160
<v Speaker 5>offset the price increases. But the biggest delta between one

0:09:35.240 --> 0:09:38.440
<v Speaker 5>Q and two Q is tariffs. So the guidance that

0:09:38.480 --> 0:09:40.760
<v Speaker 5>we see here has to be a result of that

0:09:40.760 --> 0:09:42.400
<v Speaker 5>that wide net that they've cast it.

0:09:42.840 --> 0:09:45.640
<v Speaker 2>You mentioned the PS, but translate for.

0:09:45.600 --> 0:09:50.240
<v Speaker 5>Us sure a third party and first party. First party

0:09:50.400 --> 0:09:54.080
<v Speaker 5>when Amazon owns the goods, so basically they take on

0:09:54.160 --> 0:09:58.040
<v Speaker 5>the cost and they directly source it from the supplier.

0:09:58.160 --> 0:09:59.680
<v Speaker 5>Third party is if you and I go on to

0:09:59.720 --> 0:10:01.440
<v Speaker 5>am done and we start selling stuff.

0:10:01.640 --> 0:10:04.600
<v Speaker 2>What's the breakdown in terms of actual goods that are

0:10:04.600 --> 0:10:06.240
<v Speaker 2>sold third party versus first party?

0:10:06.880 --> 0:10:09.760
<v Speaker 5>Sure, third party we estimate is about sixty five percent

0:10:10.280 --> 0:10:12.560
<v Speaker 5>and third and first party is about thirty five to

0:10:12.559 --> 0:10:14.160
<v Speaker 5>forty percent. Okay, sixty four.

0:10:14.720 --> 0:10:16.560
<v Speaker 2>And is there more like third party is more from

0:10:16.679 --> 0:10:18.960
<v Speaker 2>China or do we not know than first party?

0:10:19.000 --> 0:10:21.680
<v Speaker 5>Well we Amazon doesn't tell you how much they get

0:10:21.679 --> 0:10:24.040
<v Speaker 5>from China, but just by looking at what's on their

0:10:24.080 --> 0:10:28.360
<v Speaker 5>platforms and third party data, irrespective third party or first party,

0:10:28.400 --> 0:10:32.040
<v Speaker 5>it's estimated that over seventy percent of what's sold on

0:10:32.080 --> 0:10:36.319
<v Speaker 5>the Amazon dot Com platform is from China. So it's

0:10:36.360 --> 0:10:38.880
<v Speaker 5>a large, large, large piece of their market place.

0:10:39.080 --> 0:10:41.320
<v Speaker 2>Just to remind everybody, I mean you you you study

0:10:41.320 --> 0:10:43.800
<v Speaker 2>e commerce at Leisha off price retail. This is you know,

0:10:43.840 --> 0:10:48.400
<v Speaker 2>this is your world. This stuff is made overseas, like

0:10:48.720 --> 0:10:50.800
<v Speaker 2>very little of it is made here in the US,

0:10:51.760 --> 0:10:52.319
<v Speaker 2>very little.

0:10:52.360 --> 0:10:54.600
<v Speaker 5>I mean food is the only thing we may procure

0:10:54.679 --> 0:10:58.560
<v Speaker 5>locally that Amazon sells. Really everything else, the bulk of

0:10:58.600 --> 0:11:01.400
<v Speaker 5>what you buy in retail in the US is made

0:11:01.480 --> 0:11:03.560
<v Speaker 5>outside of the US. It doesn't matter who you are.

0:11:05.240 --> 0:11:08.920
<v Speaker 3>What I don't know, Okay, I'll let him have a moment.

0:11:09.679 --> 0:11:11.400
<v Speaker 3>You know what's interesting put in We kind of just

0:11:11.480 --> 0:11:11.839
<v Speaker 3>laughed that.

0:11:12.040 --> 0:11:14.560
<v Speaker 4>Normally when we're talking Amazon, we're all over Amazon Web

0:11:14.600 --> 0:11:17.679
<v Speaker 4>services and it's like, oh yeah, that retail business. So

0:11:17.720 --> 0:11:19.840
<v Speaker 4>what an interesting kind of report to go through and

0:11:19.840 --> 0:11:22.400
<v Speaker 4>what we're focusing on. I do want to point out, though,

0:11:22.480 --> 0:11:26.560
<v Speaker 4>that AWS reported first quarter sales gains seventeen percent to

0:11:26.640 --> 0:11:29.120
<v Speaker 4>twenty nine point three billion, in line with analyst testaments.

0:11:29.160 --> 0:11:32.480
<v Speaker 4>It was the unit's slowest growth in a year. So

0:11:33.160 --> 0:11:35.400
<v Speaker 4>it does feel like, I don't know, like, what do

0:11:35.440 --> 0:11:36.160
<v Speaker 4>we get out of that.

0:11:37.679 --> 0:11:38.560
<v Speaker 3>I think it's okay.

0:11:38.679 --> 0:11:41.160
<v Speaker 5>I mean, okay, I'm going to see businesses pull forward

0:11:41.240 --> 0:11:44.160
<v Speaker 5>spend pulled back on spend. There's still a lot of

0:11:44.200 --> 0:11:47.000
<v Speaker 5>momentum here on the AWS side. And really, you know

0:11:47.000 --> 0:11:50.480
<v Speaker 5>why the sales were just in line. The margin was

0:11:50.559 --> 0:11:54.600
<v Speaker 5>incredible thirty nine percent operating margins thirty nine point five

0:11:54.640 --> 0:11:58.760
<v Speaker 5>percent roughly, that's huge. Consensus is looking for about thirty

0:11:58.760 --> 0:12:00.600
<v Speaker 5>five percent. So we do that think, you know, this

0:12:00.679 --> 0:12:04.080
<v Speaker 5>business will ab and flow and you'll have high margins,

0:12:04.120 --> 0:12:06.280
<v Speaker 5>you'll have low margins depending on where they invest. But

0:12:06.320 --> 0:12:10.640
<v Speaker 5>the long term potential of AWS is still pretty sizable,

0:12:10.720 --> 0:12:12.280
<v Speaker 5>and there's a long runway here.

0:12:12.920 --> 0:12:15.200
<v Speaker 2>Okay, So if we think about this in the context

0:12:15.240 --> 0:12:17.320
<v Speaker 2>of what we heard from what we've heard from other

0:12:17.400 --> 0:12:21.120
<v Speaker 2>companies thus far, what we heard from Microsoft yesterday, and

0:12:21.200 --> 0:12:23.120
<v Speaker 2>as a reminder, I mean, you cover the e commerce

0:12:23.360 --> 0:12:25.839
<v Speaker 2>at leisure, the off price retail. How do you think

0:12:25.880 --> 0:12:27.880
<v Speaker 2>about this in terms of the retail world like the

0:12:27.920 --> 0:12:30.640
<v Speaker 2>Walmart's of the world, the targets of the world. How

0:12:30.679 --> 0:12:34.720
<v Speaker 2>does this report sort of inform the way we should

0:12:34.760 --> 0:12:36.760
<v Speaker 2>be thinking about and investors should be thinking about those

0:12:36.760 --> 0:12:37.400
<v Speaker 2>other companies.

0:12:38.360 --> 0:12:41.319
<v Speaker 5>I think if Amazon's facing these tariff headmonds, so is

0:12:41.360 --> 0:12:46.160
<v Speaker 5>everyone else, including Walmart, including smaller companies, medium sized companies,

0:12:46.480 --> 0:12:49.280
<v Speaker 5>And really there is no escape from this unless we

0:12:49.559 --> 0:12:51.920
<v Speaker 5>see things come from here. The one hundred and forty

0:12:51.920 --> 0:12:54.880
<v Speaker 5>five percent tariff that you see on China is sizable.

0:12:55.320 --> 0:12:59.320
<v Speaker 5>Now if that stays that way, the consumer is going

0:12:59.360 --> 0:13:02.560
<v Speaker 5>to be paying higher prices. We will see some out

0:13:02.559 --> 0:13:05.600
<v Speaker 5>of stocks on shelves in the coming months, as most

0:13:05.679 --> 0:13:09.439
<v Speaker 5>companies have halted shipments from China, and it's not going

0:13:09.480 --> 0:13:11.920
<v Speaker 5>to be an overnight switch to take everything that you

0:13:12.000 --> 0:13:13.640
<v Speaker 5>make in China to somewhere.

0:13:13.240 --> 0:13:17.840
<v Speaker 2>Else, or even impossible for something some analysts have said, well,

0:13:17.880 --> 0:13:20.040
<v Speaker 2>you said empty shelves. Where are we going to see them?

0:13:20.160 --> 0:13:20.920
<v Speaker 2>What do you think we'll.

0:13:20.760 --> 0:13:23.520
<v Speaker 3>See them empty shells? But in like a drugstore. But

0:13:23.720 --> 0:13:25.360
<v Speaker 3>I don't know that's.

0:13:25.240 --> 0:13:28.080
<v Speaker 2>Because everybody stole everything there, Carroll, don't you know how

0:13:28.120 --> 0:13:28.520
<v Speaker 2>this works?

0:13:28.559 --> 0:13:31.080
<v Speaker 3>I know it's there was a little war perspective. Go ahead, Buno.

0:13:31.200 --> 0:13:34.680
<v Speaker 5>Sorry, Well, you won't see empty shelves on Amazon, but

0:13:34.760 --> 0:13:36.440
<v Speaker 5>you will see out of stocks. In fact, you know,

0:13:36.480 --> 0:13:39.160
<v Speaker 5>I was just browsing the web randomly and I started

0:13:39.160 --> 0:13:41.640
<v Speaker 5>to see some things that just said out of stock,

0:13:41.840 --> 0:13:43.880
<v Speaker 5>like we'll let you know when it comes back. So

0:13:43.920 --> 0:13:47.040
<v Speaker 5>I think you'll start to see inventory, especially that that

0:13:47.080 --> 0:13:50.560
<v Speaker 5>comes out of China, be put on hold and we

0:13:50.600 --> 0:13:53.200
<v Speaker 5>don't know when it'll come back. Because unless you raise

0:13:53.240 --> 0:13:56.280
<v Speaker 5>the prices or double them, you're not making the same

0:13:56.320 --> 0:13:57.320
<v Speaker 5>margin on what's.

0:13:57.200 --> 0:14:00.199
<v Speaker 2>The consumer's willingness to pay for this stuff. Because, as

0:14:00.200 --> 0:14:02.760
<v Speaker 2>I was mentioning to Caroline, if we see these price

0:14:02.800 --> 0:14:04.960
<v Speaker 2>increases across the board, if we see them a Target,

0:14:04.960 --> 0:14:06.600
<v Speaker 2>if we see them at Walmart, it's not like this

0:14:06.640 --> 0:14:09.560
<v Speaker 2>is an Amazon specific story. We're going to see this everywhere.

0:14:09.679 --> 0:14:11.400
<v Speaker 2>At what point does the consumer throw in the towel

0:14:11.440 --> 0:14:12.880
<v Speaker 2>and say I'm not going to do this.

0:14:12.960 --> 0:14:13.680
<v Speaker 3>I'm not going to pay.

0:14:14.720 --> 0:14:16.800
<v Speaker 5>I think the consumer will say I'm not going to

0:14:16.840 --> 0:14:20.000
<v Speaker 5>pay when prices go up thirty forty percent, Right, it's

0:14:20.040 --> 0:14:22.480
<v Speaker 5>going to get more expensive. And if they say they

0:14:22.520 --> 0:14:25.320
<v Speaker 5>don't pay, it means before they've bought ten things, now

0:14:25.320 --> 0:14:27.960
<v Speaker 5>they'll buy three things. Where are they buying those three things?

0:14:28.040 --> 0:14:30.280
<v Speaker 5>Are they going to trade down from a national brand

0:14:30.280 --> 0:14:33.600
<v Speaker 5>to a private brand. Are they going to buy more

0:14:33.880 --> 0:14:36.400
<v Speaker 5>staples that they can you know, like staple colors that

0:14:36.440 --> 0:14:39.640
<v Speaker 5>they can reuse, recycle reware, and wear less fashion that

0:14:39.680 --> 0:14:42.320
<v Speaker 5>goes out of style quickly. There's going to be trade

0:14:42.360 --> 0:14:46.880
<v Speaker 5>offs if prices rise materially. That said, we do think that,

0:14:47.080 --> 0:14:50.960
<v Speaker 5>you know, people will just switch brands, they'll switch options

0:14:51.000 --> 0:14:53.600
<v Speaker 5>where they can get things cheaper. We're going into the

0:14:53.640 --> 0:14:56.280
<v Speaker 5>back half in just a few months, and that's the

0:14:56.280 --> 0:14:59.680
<v Speaker 5>peak selling season of retail. When you think about toys

0:15:00.040 --> 0:15:02.400
<v Speaker 5>specifically right for the holidays, when you think of back

0:15:02.440 --> 0:15:05.040
<v Speaker 5>to school, Yeah, I mean, what do you get your

0:15:05.080 --> 0:15:06.840
<v Speaker 5>kids If you're not going to get them the barbie

0:15:06.960 --> 0:15:08.480
<v Speaker 5>and you're not going to pay, you know, you can

0:15:08.520 --> 0:15:09.080
<v Speaker 5>only get them.

0:15:08.960 --> 0:15:14.120
<v Speaker 4>Two barbies thirty barbies only two dollars dolls. Sorry, no,

0:15:14.240 --> 0:15:17.360
<v Speaker 4>I'm just repeating you know what we've heard. Hey, one

0:15:17.400 --> 0:15:19.560
<v Speaker 4>last question I will say though, with the Amazon cart,

0:15:19.600 --> 0:15:21.560
<v Speaker 4>like when you put them in and like you automatically

0:15:21.560 --> 0:15:23.920
<v Speaker 4>see the value, like if things start to get more expensive,

0:15:24.160 --> 0:15:27.920
<v Speaker 4>like you might pull back thirty seconds. Top question you

0:15:28.000 --> 0:15:29.920
<v Speaker 4>think must be asked on the Amazon call?

0:15:31.120 --> 0:15:33.880
<v Speaker 5>How are we weathering this teriff storm that we're going into,

0:15:34.080 --> 0:15:36.600
<v Speaker 5>especially you know with three piece sellers. How are they

0:15:36.640 --> 0:15:40.080
<v Speaker 5>going to control that? Amazon is still an attractive place

0:15:40.120 --> 0:15:43.080
<v Speaker 5>where value is seen because they don't have a control

0:15:43.160 --> 0:15:44.480
<v Speaker 5>on prices for everything.

0:15:44.800 --> 0:15:46.560
<v Speaker 4>All right, Gonna leave it there, Hey, put them, Thank

0:15:46.600 --> 0:15:50.320
<v Speaker 4>you so much, super super good conversation.

0:15:50.360 --> 0:15:50.760
<v Speaker 3>Put them.

0:15:50.760 --> 0:15:53.240
<v Speaker 4>Coyle, senior analyst for e commerce at Leisure, Off Price

0:15:53.280 --> 0:15:55.840
<v Speaker 4>Retail for Bloomberg Intelligence. Shares of Amazon by the Way,

0:15:55.880 --> 0:15:58.640
<v Speaker 4>which gave a weeker than expected forecast for operating profit

0:15:58.640 --> 0:15:59.480
<v Speaker 4>in the current quarter.

0:15:59.640 --> 0:16:00.960
<v Speaker 3>Off It's lows but still down.

0:16:04.400 --> 0:16:04.440
<v Speaker 5>H