Amazon took a mysterious $1 billion hit from customer returns and tariff maneuvering
During the company's earnings call, CFO Brian Olsavsky addressed the issue and analysts discussed it.
"During the quarter, we've recorded one-time charges related to some historical customer returns that have not yet been resolved and some costs to receive inventory that was pulled forward into Q1 ahead of anticipated tariffs," Olsavsky said.
Without those charges, the operating profit margin of Amazon's North America retail business would have been almost one percentage point higher, the CFO said. That equates to a roughly $800 million hit.
For the international retail business, it would have had an operating margin that was roughly 0.7% higher, Olsavsky added. That equates to about $200 million in one-time charges, for a grand total of roughly $1 billion.
What's notable here is that the losses stem from two persistent concerns — tariffs and customer returns.
Tariffs have created a climate of unpredictability, Amazon CEO Andy Jassy said during Thursday's analyst call.
Amazon did some forward buying for its wholesale business, while some third-party sellers shipped inventory ahead of schedule to avoid tariff hikes, he explained.
Still, Amazon hasn't seen the average selling price on Amazon "appreciably go up yet," Jassy noted.
"None of us knows exactly where tariffs will settle or when," he said.
Customer returns have also become a growing problem for Amazon in recent years. The company is trying to incentivize customers to use less costly return methods, and preempt returns entirely by letting shoppers on its website know when a product is frequently returned.
Amazon's first-quarter results on Thursday exceeded Wall Street estimates, but future guidance came in lower than expected. Amazon's stock dropped about 2% in after-hours trading.
When an analyst asked if Amazon expects another one-time charge for the current quarter, Olsavsky stopped short of directly addressing the question.
Instead, he said Amazon typically sees higher stock-based compensation in the second-quarter and noted additional expenses related to the Kuiper satellite project. Tariff-induced uncertainty also makes it difficult to give accurate future guidance, he added.
An Amazon spokepserson declined to comment.
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