Client Letters: Amazon Q4 Earnings

Amazon released Q4 earnings this evening. A couple of takeaways:

• North America and International product sales were down year over year - Excluding F/X adjustments, product sales were down 2% year over year for the quarter in the US and international was down for the 5th consecutive quarter.

• Services continue to be the bright spot - Top growing categories were Third-party Seller Services and Advertising. Two categories Amazon will continue to use to grow the top line with weakness in product sales.

• Inventory was in-line - Amazon controlled inventory this quarter and is relatively lite versus prior quarter growth.

• Guidance was weak - Q1 2023 guidance was +4-8% in revenue growth which implies continued weakness in product sales and a further slowing in AWS.

Bottom line for Vendor Central Brands - With lite inventories, we believe POs will and are playing catch up. We believe Amazon will “buy sales” with aggressive markdowns and seek to be the lowest price among the online majors.

Bottom line for Seller Central Brands - Anticipate further cost increases in FBA fees or further segmentation in fees to obfuscate the increases.

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