Amazon's plan to trim operational costs isn't expected to make much progress in Q4 as the company ramps up to meet holiday demand, CFO Brian Olsavsky said on a Q3 earnings call Thursday.
The online retail giant has worked to reduce added costs — including less productive and overstaffed warehouses — after they totaled $6 billion in Q1. But Olsavsky said it's difficult to improve productivity much in Q4 due to the stress that higher demand places on operations. The company plans to hire 150,000 people for seasonal positions in its network in the U.S.
"Our goal is to leave ourselves in a really good, strong condition for a fast start on a lot of initiatives in Q1 of next year," Olsavsky said.
Amazon saw more than $1 billion in operations cost improvements in Q3 as part of its ongoing efforts — less than the $1.5 billion it had previously projected.
"This represents a solid improvement in productivity quarter-over-quarter, though not quite as much as we had planned," Olsavsky said of the savings. "We are encouraged by the progress made during the quarter, but we recognize there's still a lot of opportunity to continue to improve productivity and drive cost efficiencies throughout our networks."
Customer demand finally cooled off for Amazon in 2022, after skyrocketing the previous two years and leading the company to double the size of its operations. Facing excess capacity, Amazon has closed, canceled and delayed dozens of facilities across the country.
Although Amazon is optimistic "about the arc of demand versus supply" in its fulfillment and transportation operations, inflation adds uncertainty to the equation, Olsavsky said. The company saves on transportation costs by making sure its trucks are fully utilized and long-distance shipments are minimized, trimming fuel consumption in the process.
"We have to get our cost structure back to pre-pandemic levels in a lot of areas of the company and mostly in operations," Olsavsky said.
Amazon shoppers have also become more cost-conscious amid inflationary pressures. The company is prepared to meet holiday demand — Olsavsky said there's plenty of inventory available and delivery speeds are close to desired levels — but it is also aware of the financial challenges consumers are facing.
"We're very optimistic about the holiday," Olsavsky said. "But we're realistic that there's various factors weighing on people's wallets, and we're not quite sure how strong holiday spending will be versus last year."
Amazon expects its Q4 net sales to range between $140 billion and $148 billion, which would be a 2% to 8% increase YoY. That would be slower growth than it saw in Q4 2021, when net sales increased 9% YoY.