Consumers aren’t showing signs of cutting back on spending even as retail figures from other chains — particularly those that are closing stores — show a softening of demand, according to the most recent results from Amazon (AMZN). Shares in the online retailer surged nearly 9% in after-hours trading on Thursday after the company reported better-than-expected earnings, sending its market cap above $600 billion for the first time ever.
Walmart and Best Buy lowered their profit outlooks for the second quarter and full year earlier this week, alarming retailers that soaring inflation was impacting consumer spending.
Other retailers, including Amazon, Target, and Macy’s, also fell following Walmart’s announcement on fears they would face similar challenges.
But Amazon executives said Thursday they haven’t seen inflationary impacts comparable to those hurting other retailers. Amazon’s CFO Brian Olsavsky was asked whether inflation has changed how consumers are spending money during a press conference about the company’s second-quarter results.
“I haven’t seen anything yet,” Olsavsky said. “We saw demand rise during the quarter and June was very strong.”
After its supply lines were derailed by a bug, Amazon managed to produce good progress with keeping items in stock and distribution rates back to normal. With operations less hindered, Amazon expects consumers to return to buying their products.
Deflation-weary consumers were showing no signs of curtailing spending, but even with that their earnings from e-commerce declined from high peaks. The broader decline in e-commerce was seen as many shoppers were going back to physical stores.
For the current quarter, Amazon expects sales to come in between $125 billion and $130 billion, growing at a rate of 13% to 17%. Refinitiv had forecast sales of $126.4 billion, and a beating of expectations sent the stock up over 13% after hours.
Amazon has a particular advantage of its rival Walmart.
The retailer has blamed higher grocery and gas prices, noting that shoppers spend more on food and less on items like electronics and clothing. Higher ticket items were less popular and piled up on shelves. As a result, Walmart aggressively discounted unneeded items, hurting its margins.
Andrew Lipsman, principal analyst at eMarketer, believes that Amazon is bolstered by a greater mix of middle and high-income consumers, while Walmart is dominated by lower-income consumers, which are more sensitive to inflation.
Walmart right now has a much narrower margin and is going to be more sensitive to these effects of inflation.
Tom Forte, analyst for D.A. Davidson, has agreed. Amazon’s core consumers are better off than Walmart’s, and that allows it to outperform Walmart, Forte has said, and this opinion is an analyst rating of buy.
Amazon also has an ample built-in consumer base of more than 200 million members that are ready to buy more. A recent study has shown that Amazon Prime discount club members tend to spend more and order more frequently than non-Prime members.
Amazon said Prime members do not appear to be canceling their memberships to reduce costs in the face of inflation.
“We are pleased with the level of membership and retention in our Prime program,” Olsavsky said. “It was better than we had expected.”.