Amazon to slow down hiring as sales growth sputters

E-commerce major Amazon has said it will pause hiring in certain businesses amid moderating sales and recessionary fears, a day after its big tech peer Meta revealed it would "dramatically" reduce hiring to cut costs.

"As the third quarter progressed, we saw moderating sales growth across many of our businesses as well as the increased foreign currency headwinds, I mentioned earlier, and we expect these impacts to persist throughout the fourth quarter," Amazon chief financial officer Brian Olsavsky said on October 28.

"As we've done at similar times in our history, we're also taking actions to tighten our belt, including pausing hiring in certain businesses and winding down products and services where we believe our resources are better spent elsewhere."

In the third quarter, worldwide net sales were $127.1 billion, representing an increase of 19 percent year-over-year, excluding approximately 460 basis points (bps) of unfavourable impact from changes in foreign exchange rates. However, the sales figure was marginally lower than what analysts had expected. One basis point is one-hundredth of a percentage point.

For the fourth quarter, Amazon has forecast net sales of between $140 billion and $148 billion, or growth as little as 2 percent from a year earlier. Analysts were expecting guidance of $155.2 billion, a Reuters report said.

Facing high inflation and receding consumer demand, Amazon's Chief Executive Officer Andy Jassy has raced to control costs across the company's array of businesses.

Amazon has slowed warehouse openings and refrained from filling some open positions. It will shut down its virtual healthcare service by year-end, and is scaling back a long-touted effort to deliver goods through small autonomous sidewalk cars.

Still, worldwide shipping costs grew 10 percent in the third quarter to $19.9 billion. Amazon's net income also decreased to $2.9 billion in the third quarter.

While Amazon would continue to fund earlier-stage businesses like its lucrative cloud-computing and advertising divisions, it would question costs elsewhere and proceed carefully on hiring, Olsavsky said.

European consumers in particular have spent less than their American counterparts, pinched by the war in Ukraine and higher fuel costs, which increased Amazon's expenses, the company said. Its international-segment operation loss widened to $2.5 billion in the third quarter from $0.9 billion a year prior.

As the dollar continued to strengthen during the quarter, the foreign exchange impact was higher than the 390 basis points that the company had incorporated into its Q3 guidance. This led to a hit of approximately $900 million.