Amazon CEO Andy Jassy confident company can get high costs in check

Amazon CEO Andy Jassy speaks during the GeekWire Summit in Seattle on Oct. 5, 2021.

David Ryder | Bloomberg | Getty Images

Amazon CEO Andy Jassy said the company is focused on returning to a “healthy level of profitability” after slowing retail sales and rising costs ate into its latest quarterly earnings.

“We have effectively lowered our cost structure before and I have high confidence that we’ll get back on track as we work through these incredibly unusual past two years,” Jassy said Wednesday at Amazon’s annual shareholder meeting, his first since taking the helm from founder Jeff Bezos in July.

Jassy took over during a tumultuous period at Amazon, initially because of Covid-19, and then as inflation, rising rates and the war in Ukraine started taking its toll on the economy. Amazon took on billions of dollars in costs tied to the pandemic, when it ramped up testing and cleaning and put in place other safety measures for frontline employees. The company also doubled its physical footprint and increased hiring to manage a surge in online orders.

As 2021 wrapped up, Amazon faced higher costs due to supply chain and labor shortages, along with inflationary pressures. Then, in February, Russia invaded Ukraine, which pushed up the price of gasoline, and coincided with soaring costs for all sorts of goods across the globe.

Last month, Jassy said in an interview with CNBC that the costs from inflation, the coronavirus pandemic and the war in Ukraine had become too high for the company to absorb.

“We’ve had some unusual things happen the last couple of years, some more in our control than others,” Jassy said on Wednesday. “The external factors that were maybe a little less in our control really relate to inflation, where the costs of line haul, and trucking, and ocean and air and fuel have all gone very substantially up. We’re working hard to mitigate those costs wherever we can.”

Amazon in April imposed a 5% fee to U.S. third-party sellers, who use its shipping and storage services in an effort to offset some of those costs.

The company has also struggled to make use of all the warehouse capacity it added during the pandemic. And after months of worker shortages, it’s now overstaffed in its fulfillment network, as many of the recent hires are no longer needed with e-commerce sales cooling. In its first-quarter results, Amazon CFO Brian Olsavsky said the overstaffing resulted in “lower productivity,” which added approximately $2 billion in costs compared to last year.

Jassy on Wednesday confirmed a report from Bloomberg that Amazon intends to shed some of its warehouse space to address the issue with excess capacity.

“We have a number of steps we’re taking right now,” Jassy said. “We’re trying to defer building activity on properties where we just don’t need the capacity yet and we’re going to let some leases expire as well. But I’m also quite confident we’ll grow into this footprint.”

WATCH: Watch CNBC’s full interview with Amazon CEO Andy Jassy on first annual letter to shareholders

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