Mohit Oberoi
After weeks of rumors and speculation, Amazon (NYSE: AMZN) has officially announced that it would hold a Prime Day on October 11 and 12. It would be the second Prime Day of the year and the first time in history that the e-commerce giant would hold two Prime Days in a year.
The sales bonanza, where members get extra discounts would be held in 15 countries including the US, UK, Canada, China, and France. Amazon would feature a Top 100 list for the first time during the event and buyers would get good bargains from brands like Hasbro, Samsung, and iRobot. Notably, last month, Amazon announced that it would acquire iRobot.
The company also said that buyers would get good deals on Peloton. While the home fitness equipment used to sell its equipment through its own sales channels and website, last month it announced a partnership with Amazon to sell its products on its platform.
Commenting on the second Prime Day of the year, Jamil Ghani, President of Amazon Prime said, “We are so excited to help Prime members kick off the holiday season with Amazon’s new Prime Early Access Sale—an exclusive opportunity for members to get deep discounts on top brands we know they are looking for this time of year.”
Amazon to Hold Second Prime Day amid Sales Slump
Notably, Amazon’s announcement of a second Prime Day in 2022 is coming amid a slump in retail sales. Amazon posted revenues of $121.2 billion in the second quarter, which was 7.2% higher than the second quarter of 2021. It was the slowest revenue growth for the company in over two decades.
Along with a slowdown in retail sales, Amazon is also battling tougher YoY comps. Also, as the economy has reopened, a lot of people have moved back to shopping at brick-and-mortar stores. Costco reported a 16% rise in its fiscal year 2022 sales as shoppers returned to stores after the lockdowns were lifted.
Meanwhile, while e-commerce sales were slow in the second quarter of 2022, Amazon’s other businesses like Prime subscription, digital advertisement, and cloud performed well. Amazon’s subscription revenues rose 14% to $8.72 billion in the quarter. The company has increased its Prime subscription prices amid inflationary pressures.
Earlier this year, Amazon raised the monthly Prime subscription from $12.99 to $14.99 and the annual subscription from $119 to $139 for its US customers. It has also increased prices in Europe.
US Retail Industry Has an Inventory Problem
Meanwhile, along with the sales slump, Amazon’s second Prime Day is also a reflection of higher inventories with retail companies. Even Walmart had to offer discounts to clear some of the inventory, especially in clothing. Costco also saw an increase in inventory in the fiscal fourth quarter of 2022.
From being supply constrained, a lot of US retail companies now find themselves demand-constrained. They have built a lot of inventory amid the global supply chain outages and are now looking to clear the inventory. The upcoming holiday shopping season would help retail companies clear some of the inventory.
Most Wall Street Analysts Are Bullish on Amazon Stcok
Most Wall Street analysts are bullish on Amazon stock. Earlier this month, Bank of America reiterated its buy rating on Amazon stock. The brokerage is not too perturbed about the recession warning issued by FedEx.
Morgan Stanley is also overweight on Amazon. It said, “Our fulfillment utilization math implies AMZN has built enough capacity until 4Q:24, giving us increased confidence in scaling efficiencies and profit beats ahead. It also causes us to lower ’23/’24 capex by $10bn/$6bn.”
Notably, Amazon has admitted that it has excess fulfillment network capacity. It also said that it is overstaffed and has laid off some of the contractors to align the workforce in line with the current environment. The company also booked a massive loss in the second quarter due to mark-to-market losses on its investment in Rivian.
Alphabet is another stock that Wall Street is bullish on after the crash. Neil Veitch, investment director at SVM Asset Management believes that Alphabet stock is a good buy for the medium term.
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This article was written for Business 2 Community by Mohit Oberoi.
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