Amazon’s Performance Is Expected to Feel Effects of Supply-Chain Crunch

The company is set to post fourth-quarter earnings after markets close Thursday. The period encompasses the holiday shopping season, which is typically Amazon’s biggest period for sales.

Analysts polled by FactSet on average predict a record $137.7 billion in quarterly revenue but per-share earnings of $3.63, a drop from the $14.09-per-share figure the company recorded during the same period a year earlier. The company in October said it might record no operating income for the fourth quarter.

The e-commerce market received a huge windfall related to the pandemic, and no company benefited more than Amazon, which accounts for 41% of all sales online, according to the research firm Insider Intelligence. During the past two years Amazon has seen its most profitable quarters in its history.

Recently, however, growth has slowed, and Amazon has confronted the largest global supply-chain impact in recent memory. In late 2021, the company warned of a challenging end to the year but said it would commit to reducing its costs in 2022.

Amazon’s stock has reflected investor uncertainty about the extent to which it can continue growing after a pandemic-induced surge and rising costs, especially for its sprawling workforce. The company is the second-largest private employer in the U.S. after

Walmart Inc.,

with more than 950,000 employees in the country. Amazon’s share price has shrunk by about 9% in the past year, hovering now around $3,000.

The Covid-19 “reopening is going on now, so that’s a headwind for Amazon and e-commerce overall,” analyst Andrew Boone of JMP Securities said. JMP said in a recent report that it expected the company to lose e-commerce market share in last year’s fourth quarter given increased competition in the market.

Amazon executives said the company would spend roughly $4 billion in the fourth quarter to deal with higher freight and shipping costs, labor shortages and global supply-chain challenges. Amazon has boosted its pay for workers to an average of $18 an hour and offered sign-on bonuses of as much as $3,000 in some areas.

Despite higher pay, the company continues to deal with unionization campaigns. Union organizers have pledged to push Amazon to alter its working standards for hourly warehouse associates in areas such as work-pace requirements and breaks. Amazon has said it is trying to listen to its workers better and has added to benefits and safety training.

Amazon workers at a facility in Bessemer, Ala., this week will start to vote by mail in a union-election revote, and the company is confronting possible votes in New York.

Amazon has leaned ever more on its highly profitable cloud-computing business and fast-growing advertisement segment. Amazon Web Services, which rents computing, storage and networking capability to users, has continued to generate a significant portion of Amazon’s profits. Meanwhile, its advertisement division has surged as a result of new ad opportunities across Amazon’s array of businesses.

Amazon’s earnings come on the heels of blockbuster showings by its big tech peers. Google’s parent company,

Alphabet Inc.,

on Tuesday announced another quarter of strong sales and profits as a leading beneficiary of digital advertising.

Microsoft Corp.

, an Amazon cloud rival, last week reported earnings growth from demand for its cloud services.

Amazon is starting the new year with an eye on continued expansion in its business segments, particularly in entertainment. The company this year will begin to have exclusive video rights to “Thursday Night Football,” and it is waiting to close its acquisition of the Hollywood studio MGM, which is expected to bring an array of notable titles under the company’s name. Amazon agreed to pay $9 billion for MGM, including debt. The Federal Trade Commission is reviewing the deal.

Write to Sebastian Herrera at [email protected]