In Europe, consumer businesses such as Amazon face the holidays | So Good News
Oct 27 (Reuters) – Amazon.com Inc ( AMZN.O ), the global retailer whose results could represent a bellwether for the e-commerce industry, on Thursday revealed the pain of selling this holiday season: Europe.
Forecasting the slowest economic growth for every holiday in years, Seattle-based Amazon said the economic downturn has hit European consumers hard and cut their mortgages. At the same time, the cost of delivery to similar retailers has risen across the Atlantic.
Shares in the company surged 12% on a year-over-year basis to remove nearly $140 billion from its market capitalization, which also reflected sales growth in its cloud-computing division.
This dramatic decline makes Europe vulnerable to companies struggling with the growth of emerging markets. Germany and Britain are its biggest markets after the United States.
Brian Olsavsky, Amazon’s chief financial officer, told reporters: “The oil crisis and the crisis in Ukraine are hurting the economy in Europe more than the US, and this is reflected in consumer spending.”
European Union power ministers are preparing to negotiate on gas prices, the fourth emergency dispute since July. Russia’s attack on Ukraine, a major grain exporter, has raised concerns about food shortages.
Meanwhile, Britain faces a recession and high interest rates to prevent double inflation. The latest week of debit and credit card data showed Britons were spending less than before the pandemic, and luxury goods and furniture were particularly weak.
“Consumer sentiment in Europe has fallen sharply,” Unilever PLC ( ULVR.L ) chief executive Graeme Pitkethly told reporters, also warning of rising inflation and weaker domestic spending.
The US dollar has gradually gained on the Euro, adding $900 million in foreign exchange to Amazon alone, which was not expected a few months ago. The company’s net loss at its global division, hurt by higher delivery costs in Europe, rose to $2.5 billion in the third quarter from $0.9 billion a year earlier.
Not all companies feel they have a big problem. Mastercard Inc’s ( MA.N ) chief financial officer said on Thursday that the credit card issuer has so far seen little change in consumer spending in Europe.
However, multinational companies have warned of weakness in European markets. Comcast Corp, for example, ( CMCSA.O ) on Thursday said a difficult economy there would hit one of its divisions, British broadcaster Sky, in the fourth quarter.
California Wedbush Securities analyst Michael Pachter said currency changes are creating different options for US and European consumers.
“We benefit in the US from a strong dollar, which means that exports are cheaper,” he said. “Their currency is weak, so imports are very expensive.
“It’s dangerous for people who eat pounds and euros.”
Jeffrey Dustin reports in Palo Alto, Calif.; Additional reporting by Anna L Driver; Edited by Vanessa O’Connell and Stephen Coates
Our Standards: Thomson Reuters Trust Principles.