By next week, Amazon will have reported its fourth-quarter earnings for the industry’s most important three months of the year. While numerous retailers and organizations have already provided a glimpse into what has largely been a lackluster holiday season, the eCommerce giant’s size and dominant market share often carry implications that ripple well beyond its Seattle base.
That said, it is worth keeping a few basic facts in mind about Amazon since it last reported results three months ago in late October, a disappointing quarter that set in motion what could be known as the “do more with less” environment that shaped the retailer’s daily existence through the end of last year and beyond.
Amazon Then and Now
For starters, there are at least 18,000 fewer employees at Amazon than there were 90 days ago. While that number represents a small percentage of the company’s 1+ million person headcount, it takes on much larger significance in its status as a trend reversal, as it represents the first retrenchment of people and properties by the digital commerce leader in over a decade.
While layoffs and other closures reflect the border economic weakness affecting all players in the industry and will save the company some money longer term, they typically carry costs in the short term that will further erode bottom-line results.
Speaking of bottom line results, according to Seeking Alpha data, 31 analysts have lowered their Q4 earnings estimates for Amazon, while none — zero — have moved their Q4 numbers higher. As much as this is a notable dichotomy, it also significantly raises the chances that Amazon will beat expectations — albeit dramatically lowered expectations.
In short, the disappointment risk should be lower when Amazon reports its numbers and talks to analysts next Thursday (Feb 2). For a point of reference, Amazon’s stock fell about 30% in the two weeks following its Q3 announcement. In fairness, shares of Amazon have recovered some of that ground — including a solid 20% jump so far in January — but they are still about 15% below where they were at the end of Q3.
Offense and Defense
The week leading into those results saw Amazon continue to advance its ground game, so to speak, via its latest foray into the defensive but non-core healthcare sector.
Specifically, Amazon announced Tuesday (Jan. 24) that it would begin offering Prime members discounted prescription drugs and generic medications for $5 per month, all with free home delivery for Prime members.
“Navigating insurance can be a maze and getting to the pharmacy a burden,” Dr. Vin Gupta, Amazon Pharmacy’s chief medical officer, said in a news release. “Sometimes that has led to poor outcomes … as new medications don’t get filled, refills don’t get picked up, and patients suffer. Aspects of our healthcare system make what should be easy, difficult.”
The move marks the latest uptick in healthcare for Amazon, including its $3.9 Billion acquisition of the One Medical chain of medical practices last summer.
For its part, Walmart continued its recent run of announcements this week with no less than four news releases that underscored that it is still playing offense.
Notably, the week began with the debut of Walmart Business to boost B2B procurement and was followed by another hike in base wages, the first footprint expansion at its Sam’s Club warehouse unit in five years, and finally, the launch of a new discounted rate for small business sellers on its digital marketplace.
While Amazon’s stock is winning the race this month, shares of Walmart have outperformed its digitally dominant rival over 3, 6, 12, and 24 monthly periods.
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