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Amazon yesterday said that its Q2 net sales increased 7 percent to $121.2 billion, compared with $113.1 billion in second quarter 2021 - the slowest rate of growth that Amazon has seen in more than two decades.  Amazon also saw a Q2 net loss of $2.0 billion, compared with with net income of $7.8 billion during the same period a year ago;  it attributed the loss to "a pre-tax valuation loss of $3.9 billion" connected to its investment in EV manufacturer Rivian Automotive, which has seen its stock price drop precipitously since an IPO late last year.

The New York Times writes that "Amazon’s growth looked particularly meager versus a strong second quarter last year, when growth surged 27 percent. At the time, vaccines were still in the early stages of distribution and federal stimulus checks buoyed consumer spending. The company’s annual Prime Day deal event, which Morgan Stanley estimated generated $4.6 billion in revenue this year, was held in the second quarter last year but moved to the third quarter this year.

"But the results were better than Amazon had predicted, and its shares rose more than 12 percent in after-hours trading."

Reuters notes that "sales at physical stores, which are made up in large part by Whole Foods, were up 12% in the quarter. But part of that appears to be a bounce back from lockdown-related days. In the last 12 months, those sales brought in $18 billion, just 6% higher than where they were in 2018.

"With the deal to buy the grocery retailer going on five years, Amazon’s ability to be transformative looks less herculean … Though it’s hard to know if its Prime subscription business is encouraging people to shop in its physical stores - or conversely if stores are encouraging people to shop online - its failure to produce profit isn’t exactly an endorsement.

"And it raises questions about other ventures that Amazon has taken on. A partnership with food-delivery service GrubHub may enable it to layer on offerings for Prime members, but that doesn’t matter much if those extra services never help Amazon’s e-commerce business deliver profit. Ditto a push into healthcare. Meantime Amazon Web Services’ operating margins of near-30% are strong, and the division brings in just 16% of overall sales but all the operating income. Investors waiting for the e-commerce vision to check out will be stuck in line for a while."

In a prepared statement, CEO Andy Jassy said, "Despite continued inflationary pressures in fuel, energy, and transportation costs, we’re making progress on the more controllable costs we referenced last quarter, particularly improving the productivity of our fulfillment network.  We’re also seeing revenue accelerate as we continue to make Prime even better for members, both investing in faster shipping speeds, and adding unique benefits such as free delivery from Grubhub for a year, exclusive access to NFL Thursday Night Football games starting September 15, and releasing the highly anticipated series The Lord of the Rings: The Rings of Power on September 2."

KC's View:

Amazon's numbers are mixed, but then again, most companies have mixed numbers these days.  The events of the past few years have created some enormous challenges for companies, and it is the rare business that doesn't have to realign tom some degree because of decisions made during the pandemic that are playing out differently now.

That said, I would argue that in general, Amazon’s ability to be transformative over the course of its existence has been pretty consistent.  I'd be wary about betting against it, no matter what the stock market thinks and says;  after all, Amazon generally hasn't paid a lot of attention to what the investor class demands.