Deborah Mary Sophia and Arriana McLymore
(Reuters) - Amasson tried on Thursday to ease investors’ concerns about the impact of Trump’s administration tariffs on his e-commerce business, but the company may have few options to ensure small third-party sellers remain in the face of urgent taxes.
U.S. President Trump imposed 145% of his duties on imports from China, a move that has caused companies including Amazon, Walmart and Apple to scramble to reevaluate supply chains and find ways to reduce costs.
Amazon said it has not seen soft demand and not much price increase in retail goods. It says there are already some “some categories of purchases.”
CEO Andy Jassy said in a phone call after a tribute to investors that the company is working with sellers to avoid further tariffs on goods transfer to the U.S.
"Our third-party sellers have pushed a lot of items toward many, so they have inventory here as well...we encourage this because we try to keep the price as low as possible," Jassie said.
But inventory is just a band-aid, analysts say. As shoppers step up their purchases to avoid the impact of tariffs, it may be difficult for the company and its sellers to avoid price increases when they hit inventory and place new orders in the coming months.
"I can't imagine they stocking up for more than six months," said Gil Luria, an analyst at Da Davidson.
"If we go through the next six months and we are still as uncertain as we are today... then Amazon will have to take less delicious actions. It will have to let some higher prices flow, structurally lower profit margins, and it will have to push its merchants to absorb lower profit margins."
For Apple and Amazon — and others that include Qualcomm, Samsung and Intel, reaching out to everyday consumers — tariffs have become a crisis that could bring them back in competition with rivals Microsoft and Alphabet.
Amazon shares fell about 1% on Friday. Apple Stock fell nearly 4% as iPhone maker estimated Thursday that tariffs would add about $900 million in the June quarter if rates remained unchanged. Apple CEO Tim Cook outlines major changes in the company's supply chain.
Amazon’s AWS Cloud business powered its profits, often a bastion of opposition to volatility in its e-commerce business, but the division’s performance in the first quarter disappointed the streets after Microsoft’s Azure Cloud Business exceeded expectations.
Will Rhind, CEO of global ETF issuer Graniteshares, said investors' performance for Microsoft and Google has increased expectations for cloud business and increased expectations for Amazon AWS.
"But I still think it's a great business and it's still growing," he said.
Pain is shrouded later this year
Amazon’s tariff trouble is more than just a big responsibility. On May 2, the end of De Minimis - a trade exemption that allows low-cost goods shipped directly to shoppers into the U.S. tax-free - is expected to have a significant impact on some of the company's third-party sellers and their shipping operations, which sells many items from China.
The callback has started to display. According to Reuters, some sellers are already planning to participate in major sales events, such as Amazon Prime Day in July.
Amazon's third-party seller services grew revenues more than 7% in the first quarter, excluding the impact of forex. Third-party seller services account for nearly a quarter of the company's revenue. Although Amazon predicts second-quarter sales totals above Wall Street's estimates, the outlook for its core profitability is insufficient.
Amazon did not provide any details on whether it made it easier for sellers to reduce costs or whether the company would absorb some impact.
"The worst will hit in the third and fourth quarters. Now, everyone is playing short-term games because they really don't know what to do."
(Reported by Deborah Sophia in Bangalore and Arriana Mclymore in New York City; Editors by Sanitani Ghosh and Sone Alul)