1
00:00:00,200 --> 00:00:03,360
Speaker 1: Lynn, who at one point became alarmed that President Biden

2
00:00:03,680 --> 00:00:07,520
Speaker 1: might declare a narrower set of situations under which he

3
00:00:07,520 --> 00:00:11,000
Speaker 1: would consider using the weapons. And again a story that

4
00:00:11,039 --> 00:00:13,840
Speaker 1: we've talked about a little bit. This morning in the

5
00:00:13,840 --> 00:00:16,639
Speaker 1: south Town Morning Post, they feature these comments from the

6
00:00:16,680 --> 00:00:22,040
Speaker 1: Commerce Department saying semiconductor export curbs that are hitting China

7
00:00:22,079 --> 00:00:25,560
Speaker 1: could be followed by biotech and AI restrictions. It's one

8
00:00:25,600 --> 00:00:28,200
Speaker 1: of the top stories that they feature in today's pages.

9
00:00:28,280 --> 00:00:29,960
Speaker 1: Nine minutes before the top of the art, Rich and

10
00:00:30,000 --> 00:00:32,600
Speaker 1: Dug to you. Okay, let's get to our next guests,

11
00:00:32,600 --> 00:00:35,479
Speaker 1: and we're talking Amazon as it projects it's the slowest

12
00:00:35,479 --> 00:00:39,199
Speaker 1: holiday quart of growth in the company's history. To discuss

13
00:00:39,240 --> 00:00:41,560
Speaker 1: all this is Punam Goyle and seeing at US e

14
00:00:41,680 --> 00:00:45,960
Speaker 1: commerce and retail analyst at Bloomberg Intelligence. First of all,

15
00:00:45,960 --> 00:00:48,879
Speaker 1: put him give us a sense overall of what Amazon

16
00:00:49,000 --> 00:00:52,040
Speaker 1: is suggesting about the quarter gone and what they're seeing

17
00:00:52,040 --> 00:00:57,240
Speaker 1: for the all important Christmas shopping period. Sure, so, I

18
00:00:57,280 --> 00:00:59,120
Speaker 1: think you know, when you think of Amazon, you're really

19
00:00:59,120 --> 00:01:01,960
Speaker 1: thinking of to the things. One is their aws business

20
00:01:02,000 --> 00:01:05,800
Speaker 1: and the other their retail business. So on the retail side, um,

21
00:01:05,959 --> 00:01:09,800
Speaker 1: they clearly you know, are being impacted by FX rates,

22
00:01:09,959 --> 00:01:12,840
Speaker 1: and we saw that they had a high single digit

23
00:01:12,880 --> 00:01:18,080
Speaker 1: sales increase, which falls short of expectations, largely even though

24
00:01:18,120 --> 00:01:21,080
Speaker 1: they had the benefit of Prime Day which added about

25
00:01:21,080 --> 00:01:24,440
Speaker 1: four basis points to sale heading into the fourth quarter.

26
00:01:24,880 --> 00:01:28,360
Speaker 1: I think the question is they're prepared, and they said

27
00:01:28,440 --> 00:01:31,120
Speaker 1: that out right, but the question really comes down to

28
00:01:31,240 --> 00:01:34,360
Speaker 1: our the customers going to spend as much as or

29
00:01:34,400 --> 00:01:37,760
Speaker 1: more than they spend last year, and with inflation concerns

30
00:01:38,240 --> 00:01:42,320
Speaker 1: top of mind, With spending being curved across the board

31
00:01:42,840 --> 00:01:45,880
Speaker 1: across many industries, we think that it will be tougher

32
00:01:46,360 --> 00:01:50,440
Speaker 1: for Amazon and others to really grab share of wallet um.

33
00:01:50,520 --> 00:01:53,880
Speaker 1: It will be more promotional and retailers will have to,

34
00:01:54,560 --> 00:01:57,000
Speaker 1: you know, give up margin to drive sales. So you're

35
00:01:57,120 --> 00:01:59,600
Speaker 1: looking at inflation through the lens of how it may

36
00:01:59,640 --> 00:02:02,400
Speaker 1: impact act the consumer. But I'm wondering how this is

37
00:02:02,440 --> 00:02:07,000
Speaker 1: impacting the company. What type of cost inflation has Amazon

38
00:02:07,120 --> 00:02:10,680
Speaker 1: had to deal with. I mean, inflation has been a

39
00:02:10,720 --> 00:02:14,200
Speaker 1: big problem for Amazon. In fact, they expected to cut

40
00:02:14,200 --> 00:02:17,239
Speaker 1: one point five billion dollars in cost from two Q

41
00:02:17,440 --> 00:02:20,120
Speaker 1: to three Q, weren't able to do that. They were

42
00:02:20,160 --> 00:02:23,840
Speaker 1: able to cut one billion, so five million short and

43
00:02:23,919 --> 00:02:26,919
Speaker 1: that was largely due to the fact that they couldn't

44
00:02:27,000 --> 00:02:30,000
Speaker 1: really find cost savings while they were ramping up for

45
00:02:30,520 --> 00:02:34,080
Speaker 1: sales events like Prime Day and early access sales. Costs

46
00:02:34,120 --> 00:02:36,920
Speaker 1: are going to stay elevated. It's not going to be

47
00:02:36,960 --> 00:02:39,320
Speaker 1: an easy feat for them to really bring cost down

48
00:02:39,400 --> 00:02:43,640
Speaker 1: any time soon. We expect cost pressures to persist through

49
00:02:43,680 --> 00:02:47,960
Speaker 1: early one age of next year at the minimum. And

50
00:02:48,000 --> 00:02:50,000
Speaker 1: the question is do they have pricing path that that's

51
00:02:50,000 --> 00:02:52,080
Speaker 1: going to be crucial. But let's also look at all

52
00:02:52,120 --> 00:02:54,959
Speaker 1: this punam and say and and just take a look

53
00:02:55,000 --> 00:02:58,720
Speaker 1: at what the read through is overrule amongst its competitors

54
00:02:58,919 --> 00:03:03,040
Speaker 1: and the industry generally. Yeah, so the industry um is

55
00:03:03,080 --> 00:03:05,920
Speaker 1: taking prices up where they can, so they have been

56
00:03:05,960 --> 00:03:10,040
Speaker 1: selective price increases, and I suspect that where Amazon can

57
00:03:10,080 --> 00:03:12,480
Speaker 1: do so, it will. But the question is on the

58
00:03:12,520 --> 00:03:15,440
Speaker 1: promotional front, right, there's too much inventory a cross retail

59
00:03:15,639 --> 00:03:19,640
Speaker 1: at Amazon and at their rivals, and as inventories continue

60
00:03:19,680 --> 00:03:23,200
Speaker 1: to build, we will see a rush to drive higher

61
00:03:23,240 --> 00:03:26,720
Speaker 1: promotions to really make room for new product. So margins

62
00:03:26,760 --> 00:03:29,919
Speaker 1: aren't going to improve and the customer will likely pay

63
00:03:30,120 --> 00:03:33,920
Speaker 1: alloy ticket and given that they'll be you know, using

64
00:03:33,919 --> 00:03:36,880
Speaker 1: promotions to really make their purchases. Back in the day

65
00:03:36,880 --> 00:03:39,400
Speaker 1: when Mr Bezos was running the company, one of the

66
00:03:39,640 --> 00:03:45,200
Speaker 1: things that he was criticized for repeatedly was taking them.

67
00:03:45,360 --> 00:03:47,680
Speaker 1: I guess you could say what would have been profit

68
00:03:47,760 --> 00:03:50,800
Speaker 1: for the company and plowing it back into build out

69
00:03:50,800 --> 00:03:55,400
Speaker 1: different types of infrastructure for Amazon. Where is Amazon these

70
00:03:55,480 --> 00:03:59,120
Speaker 1: days with with capex and spending. Yeah, I think they

71
00:03:59,200 --> 00:04:02,680
Speaker 1: have to rethink that capex budget today. Um, you're absolutely

72
00:04:02,760 --> 00:04:05,680
Speaker 1: right that back in the days, that was something that

73
00:04:05,720 --> 00:04:07,960
Speaker 1: the company strived for and named for. And it didn't

74
00:04:08,000 --> 00:04:10,040
Speaker 1: matter right that that's that's a big thing here, Like

75
00:04:10,280 --> 00:04:13,880
Speaker 1: it didn't matter that they were spending um on capex

76
00:04:13,960 --> 00:04:16,160
Speaker 1: to really build out the future of Amazon. But at

77
00:04:16,200 --> 00:04:20,600
Speaker 1: that time, growth was also more superior than it is today.

78
00:04:20,680 --> 00:04:23,159
Speaker 1: So in the face of slowing growth, I think we

79
00:04:23,200 --> 00:04:26,120
Speaker 1: heard Amazon say it, and we've talked about it many times,

80
00:04:26,520 --> 00:04:29,440
Speaker 1: that they really have to cut back on costs and

81
00:04:29,520 --> 00:04:33,640
Speaker 1: that includes future plans and areas that aren't going to

82
00:04:33,680 --> 00:04:36,080
Speaker 1: pay off anytime soon. And we saw them do this

83
00:04:36,960 --> 00:04:40,480
Speaker 1: most recently when they pulled back on the drone delivery initiative.

84
00:04:42,480 --> 00:04:47,440
Speaker 1: They I think we've got a grace merchandise volume of

85
00:04:47,880 --> 00:04:52,359
Speaker 1: one trillion dollars as a target for about Does this

86
00:04:52,480 --> 00:04:55,800
Speaker 1: derail that? I don't think it derails it. I think

87
00:04:55,839 --> 00:04:58,960
Speaker 1: it could, you know, still happen because if you look

88
00:04:59,000 --> 00:05:01,320
Speaker 1: at the underlying growth, then I think that's the key here.

89
00:05:01,600 --> 00:05:04,279
Speaker 1: If you look at the underlying sales growth that Amazon

90
00:05:04,400 --> 00:05:06,960
Speaker 1: had even this quarter and compared to the first half,

91
00:05:07,360 --> 00:05:10,720
Speaker 1: it's improved quite a lot. Taking out effects, you're still

92
00:05:10,760 --> 00:05:14,159
Speaker 1: seeing double digit sales gains. So if we continue with

93
00:05:14,200 --> 00:05:17,359
Speaker 1: those double digit sales gains for the next three years,

94
00:05:17,520 --> 00:05:21,800
Speaker 1: we can still hit that one trillion um dollar number. Also,

95
00:05:21,960 --> 00:05:24,960
Speaker 1: keep in mind that three P sales, which is more

96
00:05:25,000 --> 00:05:28,120
Speaker 1: than fifty percent of Amazon sales, did really well in

97
00:05:28,160 --> 00:05:31,080
Speaker 1: the quarter. In fact, they beat consensus, and that's a

98
00:05:31,120 --> 00:05:35,960
Speaker 1: function of higher spending within three P sellers as well

99
00:05:36,000 --> 00:05:38,880
Speaker 1: as up rising take grade as more sellers take advantage

100
00:05:38,880 --> 00:05:42,160
Speaker 1: of Amazon's growing offerings to help them support their businesses.

101
00:05:42,279 --> 00:05:45,440
Speaker 1: So away from e commerce, let's talk very briefly here

102
00:05:45,480 --> 00:05:49,160
Speaker 1: about the web services division, the cloud division that Amazon

103
00:05:49,320 --> 00:05:53,200
Speaker 1: runs so well, how has it been faring these days.

104
00:05:53,400 --> 00:05:56,000
Speaker 1: It's you know, it's still a business that we are

105
00:05:56,120 --> 00:05:59,159
Speaker 1: very optimistic about in the longer run, but in the

106
00:05:59,240 --> 00:06:03,720
Speaker 1: third quarter, we saw it gained slowed sales sload, profit sload,

107
00:06:04,200 --> 00:06:08,520
Speaker 1: and it's in part due to enterprise customers pulling back

108
00:06:08,600 --> 00:06:10,800
Speaker 1: their own spend as they focus on their own cost

109
00:06:10,839 --> 00:06:14,760
Speaker 1: saving initiatives. So it's a temporary hiccup. We do think

110
00:06:14,800 --> 00:06:19,039
Speaker 1: that will persist into early but in the long run,

111
00:06:19,200 --> 00:06:22,320
Speaker 1: we are very optimistic on the A W. S business

112
00:06:22,600 --> 00:06:25,720
Speaker 1: and that I will recover and margins will expand to

113
00:06:27,200 --> 00:06:30,920
Speaker 1: all right, thank you, Punham. Always a pleasure. Wonderful inside

114
00:06:30,960 --> 00:06:35,359
Speaker 1: from Punam Goyle, senior US e Commerce and retail analyst

115
00:06:35,680 --> 00:06:39,839
Speaker 1: at Bloomberg Intelligence, talking today about Amazon, which after the

116
00:06:39,839 --> 00:06:43,440
Speaker 1: Bell forecast net sales for the current quarter well below estimates.

117
00:06:43,440 --> 00:06:46,160
Speaker 1: This stock had been down by as much as in

118
00:06:46,200 --> 00:06:50,159
Speaker 1: the late session. Right now, we're off, Rashad Salama, thank

119
00:06:50,160 --> 00:06:52,240
Speaker 1: you for being with us the last two hours of

120
00:06:52,240 --> 00:06:55,719
Speaker 1: the program. Have a good TV program and enjoy the

121
00:06:55,720 --> 00:06:59,800
Speaker 1: weekend in Hong Kong. We'll get Tokyo and Soul online

122
00:06:59,800 --> 00:07:01,600
Speaker 1: at the top of the hour. This is Bloomberg