In Europe, consumer businesses like Amazon face holiday reckoning

Oct 27 (Reuters) – Amazon.com Inc (AMZN.O), the global retailer whose results may provide a leitmotif for the e-commerce industry, on Thursday signaled a pain point for sales this holiday season: Europe.

Seattle-based Amazon forecast the slowest holiday sales growth in years and said the economic turmoil has hit European consumers hard, cutting their household budgets. At the same time, shipping costs for retailers like him across the Atlantic have increased.

The company’s shares slumped 12% in extended trading, erasing about $140 billion from its market cap, also reflecting slower revenue growth at its cloud-computing division.

The extraordinary slump put Europe in the spotlight for a company that normally suffers from expansion into emerging markets. After the USA, Germany and Great Britain are the largest markets.

Brian Olsavsky, Amazon’s chief financial officer, told reporters, “Fuel costs and the fallout from the Ukraine war are hitting economies in Europe even harder than the US, and it’s showing in consumer spending.”

European Union energy ministers will discuss a possible bloc-wide gas price cap, the fourth such urgent debate since July. Russia’s invasion of Ukraine, a major grain exporter, has previously fueled concerns about food shortages.

The UK, meanwhile, faces a recession and higher interest rates to halt double-digit inflation. A week of credit and debit card data showed Brits are spending even less than before the pandemic, and sales of luxury goods and furniture were particularly weak.

“Consumer sentiment in Europe is at an all-time low,” Graeme Pitkethly, chief financial officer of Unilever PLC (ULVR.L), told reporters, also warning of rising inflation and depleted household savings.

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The US dollar has steadily appreciated against the euro, adding $900 million in foreign currency headwinds to Amazon alone, which was not expected a few months ago. The company’s operating loss for its international segment, which was impacted by higher shipping costs in Europe, rose to $2.5 billion in the third quarter from $0.9 billion a year earlier.

Not every company has seen such a big dent. The chief financial officer of Mastercard Inc (MA.N) said on Thursday that the credit card issuer has seen little change in the spending volume of European consumers.

Nonetheless, many multinationals have warned of weakness in European markets. For example, Comcast Corp (CMCSA.O) said Thursday that the country’s troubled economy would hit one of its units, British broadcaster Sky, in the fourth quarter.

California Wedbush Securities analyst Michael Pachter said currency changes would create divergent pathways for US and European consumers.

“We benefit from a strong dollar in the US, which means imports are cheap,” he said. ‚ÄúTheir currency is weak, so imports are super expensive.

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

Reporting by Jeffrey Dastin in Palo Alto, California; Additional reporting by Anna L Driver; Edited by Vanessa O’Connell and Stephen Coates

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