Amazon sees brick-and-mortar sales rise, online sales dip in Q4 and fiscal year

Amazon saw physical-store sales climb in the fiscal 2022 fourth quarter and full year as the e-tail giant posted strong overall sales gains for both periods.

Bottom-line results were down, however, as Seattle-based Amazon reported a slide in net income for Q4 and a nearly $3 billion net loss for the year.

For the quarter ended Dec. 31, total net sales came in at $149.2 billion, up 8.6% from $137.41 billion a year earlier, Amazon said Thursday after the market close. Excluding a $5 billion negative impact from changes in foreign exchange (FX) rates, sales were up 12%. North America segment sales advanced 13% year over year to $93.36 billion and were up 14% excluding FX.

Online sales dipped 2.3% to $64.53 billion from $66.08 billion in the prior-year period but were up 2% excluding FX, Amazon reported. Sequentially, online sales climbed 20.6% from the third to fourth quarters.

Amazon’s brick-and-mortar store sales, which include Whole Foods Market, grew 5.7% (6% excluding FX) to $4.96 billion in the fourth quarter from $4.69 billion a year earlier. The uptick built on year-over-year increases of 10% in the third quarter, 12.5% in the second quarter and 17.1% in the first quarter. Amazon physical stores turned in sequential gains in two of fiscal 2022’s four quarters.

Physical-store sales at Amazon come mainly from the Whole Foods unit and exclude online orders made via the company’s brick-and-mortar brands, such as delivery and pickup through Whole Foods and Amazon Fresh stores. Currently, Amazon’s U.S. physical stores include 535 Whole Foods Markets, 44 Amazon Fresh grocery stores, 30 Amazon Go convenience stores and two Amazon Style apparel, footwear and accessories stores.

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon," CEO Andy Jassy stated. / Photo: Shutterstock

Thirty-two new U.S. supermarkets — 21 more Amazon Fresh and 11 more Whole Foods locations — helped drive brick-and-mortar sales growth. However, Amazon in 2022 closed 68 retail outlets under the Amazon Books, Amazon 4-Star and Amazon Pop-Up banners.

For the full 2022 fiscal year, Amazon had net sales of $513.98 billion, up 9.4% from $469.82 billion in fiscal 2021. Excluding a $15.5 billion negative impact from FX, net sales rose 13% year over year. North America sales increased 13% to $315.9 billion, Amazon said. Online sales totaled $220 billion, a 0.9% dip from $222.08 billion a year ago.

Amazon tallied physical store sales of $18.96 billion in fiscal 2022, up 11.1% from $17.08 billion in fiscal 2021, when brick-and-mortar sales rose 3.4% year over year.

At the bottom line, Amazon posted fiscal 2022 fourth-quarter net income of $278 million, or 3 cents per diluted share, compared with $14.32 billion, or $1.39 per diluted share, in  the 2021 quarter. Analysts, on average, had projected quarterly adjusted earnings per share (EPS) of 17 cents, with estimates ranging from a 3 cents-per-share loss to earnings of 32 cents per share, according to Refinitiv.

Fiscal 2022 had a net loss of $2.72 billion, or 27 cents per diluted share, versus net earnings of $33.36 billion, or $3.24 per diluted share, in 2021. Analysts tracked by Refinitiv had projected Amazon’s full-year adjusted EPS at a net loss of 12 cents, on average, with forecasts running from a net loss of 32 to net income of 3 cents.

Whole Foods has unveiled a more aggressive expansion under CEO Jason Buechel, even as Amazon Fresh's expansion has stalled. / Photo: Shutterstock

Amazon noted that its fiscal 2022 net loss reflects a pretax valuation loss of $12.7 billion  ($2.3 in the fourth quarter) included in non-operating income from its investment in Rivian Automotive, versus a pretax valuation gain of $11.8 billion from the investment in 2021.

“Our relentless focus on providing the broadest selection, exceptional value and fast delivery drove customer demand in our Stores business during the fourth quarter that exceeded our expectations—and we’re appreciative of all our customers who turned to Amazon this past holiday season,” Amazon CEO Andy Jassy said in a statement on Thursday. “We’re also encouraged by the continued progress we’re making in reducing our cost to serve in the operations part of our Stores business.”

In early January, Amazon confirmed published reports that it aims to increase a planned 10,000 job cuts to more than 18,000 layoffs, including staff from retail stores. Jassy said in a blog update that the job cuts will come mainly from the company’s Amazon Stores; People, Experience and Technology (PXT); Amazon Devices; and Amazon Books units.

Signals of a slowdown by Amazon—trying to balance growth efforts and control costs amid an iffy economic forecast—had recently popped up in the Amazon Fresh grocery store business. Following a stream of openings in the United States over the past couple of years, Amazon Fresh’s expansion appears to have bogged down, with a number of sites for planned new stores sitting idle, according to published reports.

"We recorded impairments of property and equipment and operating leases, primarily related to our Amazon Fresh and Amazon Go physical stores," Amazon Chief Financial Officer Brian Olsavsky told analysts in a conference call on Q4 results late Thursday. "We're continuously refining our store formats to find the ones that will resonate with customers, will build our grocery brand and will allow us to scale meaningfully over time. As such, we periodically access our portfolio of stores and decided to exit certain stores with low growth potential. We'll also take an impairment on capitalized costs and associated values of our leased buildings. The impairment charge in Q4 was $720 million and is included in other operating expense on our income statement."

Still, Jassy and Olsavsky have described the Stores business, including grocery, as one of the units with high potential. "We continue to believe grocery is a significant opportunity, and we're focused on serving customers through multiple channels, whether that's online delivery, pickup or in-store shopping," Olsavsky said in the call.

Among the Stores business growth avenues is Whole Foods, whose CEO—Jason Beuchel—said the chain has 50 stores in its development pipeline and aspires to open 30 new stores annually.

Later this month, Amazon is lifting the order threshold for free Amazon Fresh grocery delivery to $150 from $35 for Prime members. / Photo: Shutterstock

“In the short term, we face an uncertain economy, but we remain quite optimistic about the long-term opportunities for Amazon. The vast majority of total market segment share in both Global Retail and IT still reside in physical stores and on-premises data centers,” Jassy stated in Amazon’s fiscal 2022 report. “As this equation steadily flips, we believe our leading customer experiences in these areas, along with the results of our continued hard work and invention to improve every day, will lead to significant growth in the coming years. When you also factor in our investments and innovation in several other broad customer experiences (e.g. streaming entertainment, customer-first health care, broadband satellite connectivity for more communities globally), there’s additional reason to feel optimistic about what the future holds.”

In grocery, it remains to be seen how Amazon will be impacted by plans to raise the minimum order size for free Amazon Fresh grocery delivery under Prime from more than $35 to over $150 effective Feb. 28. Under the new policy, delivery fees for Amazon Fresh will be $3.95 for orders of $100 to $150, $6.95 for orders of $50 to $100 and $9.95 for orders of less than $50.

Currently, Prime members get free Amazon Fresh grocery delivery for online orders of over $35 (more than $50 in New York City). Orders less than those amounts carry a $4.99 delivery fee. Free grocery delivery has been a key perk of the Prime benefits program. The company was making the change to “better cover grocery delivery costs and continue to enable offering a consistent, fast and high-quality delivery experience," an Amazon spokeswoman said.

"Amazon is tightening its own belt but is still investing," Jefferies analyst Brent Thill wrote in a research note on Amazon's fiscal 2022 Q4 results. "Management noted that they remain conscious of investments into a tougher environment but remain committed to investments that will drive long-term value. Amazon has pulled back on investments like grocery and Amazon Care but continues to invest behind other areas such as streaming and one-day shipping."

*Editor's Note: Article updated with analyst and Amazon executive comments.