Amazon's (AMZN) third-quarter results, reported after the market closed on Thursday, may have initially looked decent, as the company beat earnings estimates of $0.28 per share by $0.07. However, as we have all come to learn and appreciate as investors, even the very recent past really does not matter, if the future is even a bit cloudy.
It was not all that long after the earnings report that AMZN was down 20% in aftermarket trading. The culprit here was less-than-stellar guidance for the fourth quarter. Company guidance put Q4 revenue in the $140 billion to $148 billion range, significantly below the $155 billion consensus, and operating income at between $0 and $4 billion.
Amazon has always been a high-octane growth story, and while margins have improved over time (net profit margin has grown steadily from 0.6% in 2015 to 7.1% last year) this Q4 "disruption" is not being taken lightly by investors, at least initially.
The bigger question, in my view, is what, if anything, this portends for other retailers in Q4.
AMZN has become the bellwether, the 800-pound gorilla in retail, the place most of us turn to when we need to make a purchase. I wonder if this is an early sign that this year's holiday retail season might not be all that great. That certainly could dovetail with this inflationary environment, and questionable economy. Despite Q3's 2.6% GDP reading, I believe we are either already in recession, or on the way there.
I wonder what retail spending will look like this quarter in light of rising energy costs.
In the Northeast, where many of us still utilize heating oil to stay warm, it looks like an expensive winter. Our own provider is currently charging $5.999/gallon for oil. Last year at this time we paid $3.599, so prices are up 67% since then. A family that uses 400 gallons will be coughing up $2,400 this year, versus $1,440 last year. That is going to hurt, and I'll save the diesel/fuel oil shortage issue now being reported for another day.
A lot of retail stocks, especially specialty retailers, are already down substantially year-to-date, so Friday could be an interesting day as the markets further digest the Amazon news. As I write this, AMZN is down about 9% in morning trading, while other retailers including eBay (EBAY) (down 2%), Walmart (WMT) (up 1%), and Target (TGT) (down 1%) are reacting to a lesser extent.