Amazon saw physical-store sales bounce back from a double-digit drop to a double-digit gain in reporting strong overall sales and earnings for its fiscal 2021 second quarter.
For the quarter ended June 30, net sales totaled $113.08 billion, up 27% from $88.91 billion a year earlier, Amazon said yesterday after the market close. Excluding a $2.5 billion positive impact from year-over-year foreign exchange rate changes, net sales grew 24%, the Seattle-based company noted.
Online sales climbed 16% to $53.16 billion (13% excluding foreign exchange) from $52.9 billion in the prior-year period. Sequentially, online sales inched up 0.5% from the first to second quarters.
Amazon’s physical store sales, which include Whole Foods Market, jumped 11% (10% excluding FX) to $4.2 billion in the second quarter from $3.77 billion a year ago. That followed a year-over-year decline of 16% (excluding FX) in the first quarter and marked the first year-over-year gain (excluding FX) for physical store sales since the fiscal 2020 first quarter. Brick-and-mortar store sales, however, rose 7.1% sequentially from the first to second quarters of fiscal 2021.
For the 2021 first half, Amazon’s overall net sales were $221.6 billion, up 34.8% from $164.36 billion in the first six months of 2020. Online sales surged 28.5% to $106.05 billion from $82.55 billion. First-half sales for physical stores dipped 3.5% to $8.12 billion in 2021 from $8.41 billion in 2020.
Amazon’s physical-store sales are generated primarily by its Whole Foods market unit and exclude online orders made via its brick-and-mortar brands, such as Prime delivery and pickup through Whole Foods stores. Currently, Amazon’s U.S. physical stores include 505 Whole Foods Markets, 15 Amazon Fresh grocery stores, one Amazon Go Grocery store, 16 Amazon Go convenience stores (with seven locations temporarily closed), 24 Amazon Books stores, 30 Amazon 4-Star outlets and seven Amazon pop-up locations. (Join Supermarket News for our webinar "Grocery and the Amazon Threat" on Wed., Aug. 2 at 2 p.m. EST.)
Six of the temporarily closed Amazon Go stores — one in Chicago, three in New York City, one in San Francisco and one in Seattle — are being renovated, according to Amazon. Updates include an expanded food selection for customers, such as drip coffee, espresso, fountain beverages and hot foods. The other temporarily shut Amazon Go store, a 450-square-foot, employee-only location in Seattle’s Macy’s building, remains closed for the time being because most of the Amazon staff there continue to work at home due to COVID-19.
Meanwhile, Amazon Fresh has grown from 12 to 15 U.S. locations since the end of the first quarter, including stores in Washington, D.C.'s Logan Circle on July 22 — the smallest thus far at 7,303 square feet — plus stores in Bellevue, Wash., on June 17 (25,000 square feet), and in Franconia, Va. (30,000 square feet), on May 27. The Bellvue location is the first U.S. Amazon Fresh opened with Amazon's “Just Walk Out” cashierless technology, which is slated to be brought to more of the banner's stores. More Amazon Fresh stores are planned for California, Illinois, Maryland (including a location in Chevy Chase), New Jersey, Pennsylvania and Seattle. Amazon also now has five Amazon Fresh stores in the United Kingdom, with the first (at 2,500 square feet) opening in March in West London. The remaining Amazon Go Grocery store in Seattle is being transitioned to the Amazon Fresh banner.
In the second quarter, Amazon fell short of Wall Street’s consensus sales forecast. On average, analysts projected quarterly sales of $115.07 billion, with estimates ranging from $112.15 billion to $120.76 billion, according to Refinitiv.
“Amazon reported second-quarter sales 2% below consensus, the first miss in nearly three years. Net sales were also 2.5% below the high end of guidance, the largest shortfall for Amazon since 2016,” Jefferies analyst Brent Thill said in a research note on Friday.
“Amazon’s first-party business was the entire driver of the second-quarter sales miss, with every other segment coming in line or ahead of consensus. We think increased mobility following a lift in pandemic-related restrictions caused a worse-than-expected headwind,” Thill wrote. “Prime Day sales were a 400-basis-point tailwind to growth (or approximately $4 billion), but came in below our expectations and likely suffered somewhat from the event occurring toward the end of the quarter, when mobility was greatest.”
Amazon hit about the midpoint of its sales guidance range in the second quarter, according to Chief Financial Officer Brian Olsavsky. The period included the annual Prime Day sales event, which was shifted to late June in 2021 from mid-October in 2020.
“Q2 of this year was a transition period for many of our customers. As the quarter progressed, people were at home less as restrictions and lockdowns eased in some of our largest geographies, including the U.S. and much of Europe,” Olsavsky said late Thursday in a conference call with analysts. “As a result, while Prime members continue to spend more with us, growth in Prime member spend moderated compared to spending seen during the peak of the pandemic.”
Olsavsky also noted that Amazon is now cycling the big pandemic-driven gains from 2020, when the COVID-19 stoked consumer demand and triggered a boom in online shopping.
“In Q2 of this year, we began to comp this high sales period from last year, and the year-over-year revenue growth rate has narrowed. It has also narrowed as vaccines have become more readily available in many countries and people are getting out of their homes. Since May 15, again excluding Prime Day, our year-over-year growth rate has dropped into the mid-teens. Our Q3 revenue guidance range of 10% to 16% growth reflects an expected continuation of this trend,” Olsavsky explained.
“Given all this volatility, it is useful to consider the two-year compounded annual growth rate, which remains strong in the 25% to 30% range,” he said. “Recall this compares to our pre-pandemic growth rate of 21%. This reflects the acceleration of Prime membership and Prime member purchase levels over the past 18 months.”
At the bottom line, Amazon posted second-quarter net income of $7.78 billion, or $15.12 per diluted share, compared with $5.24 billion, or $10.30 per diluted share, a year ago.
Analysts, on average, had forecast adjusted earnings per share of $12.22, with estimates ranging from a low of $9.77 to a high of $15.18, according to Refinitiv.