Speaker 1: Lynn, who at one point became alarmed that President Biden
Speaker 1: might declare a narrower set of situations under which he
Speaker 1: would consider using the weapons. And again a story that
Speaker 1: we've talked about a little bit. This morning in the
Speaker 1: south Town Morning Post, they feature these comments from the
Speaker 1: Commerce Department saying semiconductor export curbs that are hitting China
Speaker 1: could be followed by biotech and AI restrictions. It's one
Speaker 1: of the top stories that they feature in today's pages.
Speaker 1: Nine minutes before the top of the art, Rich and
Speaker 1: Dug to you. Okay, let's get to our next guests,
Speaker 1: and we're talking Amazon as it projects it's the slowest
Speaker 1: holiday quart of growth in the company's history. To discuss
Speaker 1: all this is Punam Goyle and seeing at US e
Speaker 1: commerce and retail analyst at Bloomberg Intelligence. First of all,
Speaker 1: put him give us a sense overall of what Amazon
Speaker 1: is suggesting about the quarter gone and what they're seeing
Speaker 1: for the all important Christmas shopping period. Sure, so, I
Speaker 1: think you know, when you think of Amazon, you're really
Speaker 1: thinking of to the things. One is their aws business
Speaker 1: and the other their retail business. So on the retail side, um,
Speaker 1: they clearly you know, are being impacted by FX rates,
Speaker 1: and we saw that they had a high single digit
Speaker 1: sales increase, which falls short of expectations, largely even though
Speaker 1: they had the benefit of Prime Day which added about
Speaker 1: four basis points to sale heading into the fourth quarter.
Speaker 1: I think the question is they're prepared, and they said
Speaker 1: that out right, but the question really comes down to
Speaker 1: our the customers going to spend as much as or
Speaker 1: more than they spend last year, and with inflation concerns
Speaker 1: top of mind, With spending being curved across the board
Speaker 1: across many industries, we think that it will be tougher
Speaker 1: for Amazon and others to really grab share of wallet um.
Speaker 1: It will be more promotional and retailers will have to,
Speaker 1: you know, give up margin to drive sales. So you're
Speaker 1: looking at inflation through the lens of how it may
Speaker 1: impact act the consumer. But I'm wondering how this is
Speaker 1: impacting the company. What type of cost inflation has Amazon
Speaker 1: had to deal with. I mean, inflation has been a
Speaker 1: big problem for Amazon. In fact, they expected to cut
Speaker 1: one point five billion dollars in cost from two Q
Speaker 1: to three Q, weren't able to do that. They were
Speaker 1: able to cut one billion, so five million short and
Speaker 1: that was largely due to the fact that they couldn't
Speaker 1: really find cost savings while they were ramping up for
Speaker 1: sales events like Prime Day and early access sales. Costs
Speaker 1: are going to stay elevated. It's not going to be
Speaker 1: an easy feat for them to really bring cost down
Speaker 1: any time soon. We expect cost pressures to persist through
Speaker 1: early one age of next year at the minimum. And
Speaker 1: the question is do they have pricing path that that's
Speaker 1: going to be crucial. But let's also look at all
Speaker 1: this punam and say and and just take a look
Speaker 1: at what the read through is overrule amongst its competitors
Speaker 1: and the industry generally. Yeah, so the industry um is
Speaker 1: taking prices up where they can, so they have been
Speaker 1: selective price increases, and I suspect that where Amazon can
Speaker 1: do so, it will. But the question is on the
Speaker 1: promotional front, right, there's too much inventory a cross retail
Speaker 1: at Amazon and at their rivals, and as inventories continue
Speaker 1: to build, we will see a rush to drive higher
Speaker 1: promotions to really make room for new product. So margins
Speaker 1: aren't going to improve and the customer will likely pay
Speaker 1: alloy ticket and given that they'll be you know, using
Speaker 1: promotions to really make their purchases. Back in the day
Speaker 1: when Mr Bezos was running the company, one of the
Speaker 1: things that he was criticized for repeatedly was taking them.
Speaker 1: I guess you could say what would have been profit
Speaker 1: for the company and plowing it back into build out
Speaker 1: different types of infrastructure for Amazon. Where is Amazon these
Speaker 1: days with with capex and spending. Yeah, I think they
Speaker 1: have to rethink that capex budget today. Um, you're absolutely
Speaker 1: right that back in the days, that was something that
Speaker 1: the company strived for and named for. And it didn't
Speaker 1: matter right that that's that's a big thing here, Like
Speaker 1: it didn't matter that they were spending um on capex
Speaker 1: to really build out the future of Amazon. But at
Speaker 1: that time, growth was also more superior than it is today.
Speaker 1: So in the face of slowing growth, I think we
Speaker 1: heard Amazon say it, and we've talked about it many times,
Speaker 1: that they really have to cut back on costs and
Speaker 1: that includes future plans and areas that aren't going to
Speaker 1: pay off anytime soon. And we saw them do this
Speaker 1: most recently when they pulled back on the drone delivery initiative.
Speaker 1: They I think we've got a grace merchandise volume of
Speaker 1: one trillion dollars as a target for about Does this
Speaker 1: derail that? I don't think it derails it. I think
Speaker 1: it could, you know, still happen because if you look
Speaker 1: at the underlying growth, then I think that's the key here.
Speaker 1: If you look at the underlying sales growth that Amazon
Speaker 1: had even this quarter and compared to the first half,
Speaker 1: it's improved quite a lot. Taking out effects, you're still
Speaker 1: seeing double digit sales gains. So if we continue with
Speaker 1: those double digit sales gains for the next three years,
Speaker 1: we can still hit that one trillion um dollar number. Also,
Speaker 1: keep in mind that three P sales, which is more
Speaker 1: than fifty percent of Amazon sales, did really well in
Speaker 1: the quarter. In fact, they beat consensus, and that's a
Speaker 1: function of higher spending within three P sellers as well
Speaker 1: as up rising take grade as more sellers take advantage
Speaker 1: of Amazon's growing offerings to help them support their businesses.
Speaker 1: So away from e commerce, let's talk very briefly here
Speaker 1: about the web services division, the cloud division that Amazon
Speaker 1: runs so well, how has it been faring these days.
Speaker 1: It's you know, it's still a business that we are
Speaker 1: very optimistic about in the longer run, but in the
Speaker 1: third quarter, we saw it gained slowed sales sload, profit sload,
Speaker 1: and it's in part due to enterprise customers pulling back
Speaker 1: their own spend as they focus on their own cost
Speaker 1: saving initiatives. So it's a temporary hiccup. We do think
Speaker 1: that will persist into early but in the long run,
Speaker 1: we are very optimistic on the A W. S business
Speaker 1: and that I will recover and margins will expand to
Speaker 1: all right, thank you, Punham. Always a pleasure. Wonderful inside
Speaker 1: from Punam Goyle, senior US e Commerce and retail analyst
Speaker 1: at Bloomberg Intelligence, talking today about Amazon, which after the
Speaker 1: Bell forecast net sales for the current quarter well below estimates.
Speaker 1: This stock had been down by as much as in
Speaker 1: the late session. Right now, we're off, Rashad Salama, thank
Speaker 1: you for being with us the last two hours of
Speaker 1: the program. Have a good TV program and enjoy the
Speaker 1: weekend in Hong Kong. We'll get Tokyo and Soul online
Speaker 1: at the top of the hour. This is Bloomberg