Andy Jassy, CEO of Club holding Amazon (AMZN), said Thursday he’s committed to investing in overall growth while creating cost efficiencies throughout the enterprise. But the e-commerce and cloud giant has not embarked on the kind of substantial cost-cutting measures needed to fundamentally improve profitability in the same way as some of its Big Tech brethren. In a wide-ranging CNBC interview Thursday morning, Jassy outlined Amazon’s focus to streamline and reprioritize costs and expenses across its business units. The CEO, who emphasized many of the same themes in his annual letter to shareholders released hours earlier, also said he’s optimistic about future growth in its key areas like grocery, advertising and cloud computing. “While it’s tempting in turbulent times only to focus on your existing large businesses, to build a sustainable, long-lasting, growing company that helps customers across a large number of dimensions, you can’t stop inventing and working on long-term customer experiences that can meaningfully impact customers and your company,” Jassy said in his annual shareholder letter to investors. However, as broader economic pressures mount, Jassy told CNBC he’s seeing “a lot of trade down” among consumers who are trying to save money. “Consumers are spending but they’re just much more careful about what they’re spending on.” Given those dynamics, Jim Cramer has been calling for Amazon to really right-size its operations and further reduce its bloated workforce, which ballooned to over 1.62 million in Q1 of 2021 to meet record online shopping demand in the early days of the Covid pandemic. “This is a company that’s not efficient,” Jim said Thursday, following Jassy’s CNBC interview and shareholder letter. “I don’t like to hear in an era of efficiency that you’re spending a fortune on things that don’t work. Amazon is not where I want it to be.” Jim’s reference to the “era of efficiency” was a reference to what he considers as bold layoffs and cost-cutting moves at fellow Club holding Meta Platforms (META), whose CEO Mark Zuckerberg mandated a “year of efficiency.” Zuckerberg’s Meta has gone through two rounds of steep job reductions — 10,000 in March (plus not hiring 5,000 open roles) and 11,000 back in November . Meta ended 2022 with around 86,000 employees, a drop in the bucket compared to Amazon. The company has also sharply cut capital and operational expenses after a period of overspending. We believe Amazon should take a page out of Meta’s playbook. Streamlining costs Jassy reiterated the company’s principle streamlining effort included two rounds of layoffs that ended 27,000 corporate roles in 2023. But as of its fourth-quarter earnings results , Amazon still had more than 1.5 million full and part-time employees. Jim has said that Amazon needs to cut another 200,000 jobs or more to even approach pre-pandemic staffing of around 798,000 in Q4 of 2019. However, Jassy told CNBC on Thursday, regarding further job cuts: “We don’t have an intention of doing anything more meaningful, but any responsible leadership team will keep looking at the business.” At the same time, Jassy said the company is scrutinizing budgets, analyzing the long-term potential of projects, and shutting down underperforming initiatives. For example, Amazon has stopped physical store expansion, shuttered Amazon Care and Amazon Fabric, and it’s letting go of devices that won’t provide solid returns. In a recent research note, Wolfe Research said Amazon has the “potential for incremental efficiency gains with relatively minimal top-line sensitivity.” Analysts expect the e-commerce giant to continue seeking opportunities to “exit unprofitable regions, shut down businesses with questionable economics and divest non-core assets increasingly.” The analysts added, “We think the company is realizing a $3 billion to $5 billion of annual losses in these initiatives [Devices and physical stores].” Jassy also highlighted the company’s efforts to improve fulfillment center costs by moving from a national fulfillment network to a regional network model which, he said, would help improve delivery speed. Earlier this week, Amazon announced it’s charging fees on some returns made at United Parcel Service (UPS), according to an Amazon spokesperson. Customers will have to go to a nearby Whole Foods, Kohl’s (KSS) or Amazon Store to drop off packages for return free of charge. Room for growth In his shareholder letter and in Thursday’s CNBC interview, Jassy laid out his vision for growth potential in some of Amazon’s core competencies, such as grocery. “We aspire to serve more of our customers’ grocery needs than we do today. To do so, we need a broader physical store footprint,” Jassy said in his letter. Amazon bought Whole Foods Market in 2017, and it’s looking to get more competitive in the space. Another large part of Amazon’s growth is expected to come from its investments in artificial intelligence, Jassy said. Amazon has been investing in generative AI, specifically working on its on large language models or algorithms that can generate text from large data sets, which will “transform and improve virtually every customer experience,” the CEO said in his letter. Generative AI will be a key feature in the Amazon Web Services (AWS) cloud business, which will allow users to improve productivity. In fact, Amazon on Thursday launched , a service called Bedrock, which allows developers to build and scale AI applications through AWS. Jassy noted in the letter that while cloud computing is “still early in its adoption curve,” it faces near-term challenges as companies become more cautious in spending given the challenging macro conditions. Still, Jassy said the long-term fundamentals are still solid in the company’s cloud business. Jassy also addressed Amazon’s stock price during CNBC’s interview. Shares lost about half their value in 2022 in last year’s terrible market rout. While up 21% in beaten-down tech’s 2023 resurgence, the stock has underperformed the S & P 500 over a three-year period. “I don’t spend a lot of my time focused on the stock price,” Jassy said, adding he prefers to look at the value Amazon’s stock has created over the longer term. AMZN .SPX mountain 2020-04-09 Amazon vs. S & P 500 since April 2020 Bottom line Amazon needs to make additional moves to further reduce its headcount. We were hoping to hear more from Jassy on how the company rationalizes the size of its workforce compared to pre-Covid levels given more normalized demand levels and a deteriorating macroeconomic environment. However, it is positive that many of the people who were let go were in high-paying jobs. Still, much more work needs to be done here. While there are several things that management needs to get right, we continue to own the stock because Amazon can further increase efficiencies after overbuilding warehouses during the pandemic, which should lift shares higher. Another reason to hope for higher stock prices in the future is Amazon’s incredible track record since going public in 1997 in creating shareholder value. Maybe that’s the long-term Jassy was referring to in his CNBC interview. (Jim Cramer’s Charitable Trust is long AMZN, META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Andy Jassy, chief executive officer of Amazon.Com Inc., speaks during the GeekWire Summit in Seattle, Washington, U.S., on Tuesday, Oct. 5, 2021.
David Ryder | Bloomberg | Getty Images
Andy Jassy, CEO of Club holding Amazon (AMZN), said Thursday he’s committed to investing in overall growth while creating cost efficiencies throughout the enterprise. But the e-commerce and cloud giant has not embarked on the kind of substantial cost-cutting measures needed to fundamentally improve profitability in the same way as some of its Big Tech brethren.
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