Stocksak: In Europe, Amazon and other consumer businesses are facing holiday reckoning

© Stocksak. FILE PHOTO. The Amazon logo was pictured in the Bengaluru, India office on April 20, 2018. REUTERS/Abhishek N. Chinnappa/File photo

By Jeffrey Dastin

(Stocksak), – Inc. NASDAQ:, the global retailer whose results can serve as a bellwether to the ecommerce industry, announced Thursday that there was a problem in Europe for holiday sales.

Amazon, based in Seattle, predicted that it would experience the slowest revenue growth for any holiday since years. This is because European consumers have been hard hit by economic turmoil and their household budgets have been cut. Amazon also noted that the cost of shipping to retailers like itself has increased across the Atlantic.

The company’s shares plunged 12% in extended trading to wipe $140 billion off its market capitalization. This was due to lower sales growth in its cloud computing division.

This remarkable plummet placed Europe in the spotlight for a company that is often hurt by expansion in new markets. Its biggest markets after the United States are Britain and Germany.

Brian Olsavsky (Amazon’s chief financial officer) told reporters that fuel cost and the effects of the Ukraine war are hitting Europe’s economies even harder than the U.S. and that this is affecting consumer spending.

The fourth emergency debate on the subject of European Union energy ministers is scheduled for today. Russia’s invasion in Ukraine, a major exporter of grain, raised concerns about food shortages.

Britain is currently in recession and has higher interest rates to stop double-digit inflation. A recent week’s credit and debit card data showed that Britons were spending less than they did before the pandemic. Luxury and furniture sales were especially weak.

“Consumer sentiment is at an all-time low in Europe,” Unilever (NYSE 🙂 PLC Chief Financial Officer Graeme Pitkethly told reporters. Pitkethly also warned against rising inflation and depleting household savings.

The U.S. Dollar has steadily gained against the Euro, adding $900million in foreign-exchange headwinds just to Amazon. This is something it didn’t expect a few month ago. The company’s operating loss in its international segment, due to higher European delivery costs, rose to $2.5 billion in third quarter, from $0.9 million a year earlier.

Not every company has suffered as much. Mastercard Inc (NYSE :)’s chief finance officer stated Thursday that there has been no change in European consumer spending.

A wide range multinational companies warn of weakness in European markets. Comcast Corp (NASDAQ): For instance, Comcast Corp (NASDAQ 🙂 said Thursday that the difficult economy in Europe would impact one of its units, British broadcaster Sky in the fourth quarter.

Michael Pachter, analyst at California Wedbush Securities, said that currency changes are creating divergent paths to European and U.S. consumers.

He said that the U.S. benefits from a strong dollar which means imports are cheaper. “Their currency weakens, so imports can be super expensive.

“It is terrible for people who consume in pounds and euros.”

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