What will dominate this holiday shopping season: Huge demand, as shoppers use pent-up savings to splurge, or supply chain problems leading to empty shelves and presents on back order?
Apple’s latest earnings report is amping up fears that production and shipping complications will steal the spotlight. What’s happening: The most valuable US company said after markets closed that chip shortages and manufacturing disruptions tied to Covid-19 slashed $6 billion off its revenue last quarter. Apple (AAPL) still posted quarterly sales of $83.4 billion. But that’s slightly lower than Wall Street expected. Shares are down 3.5% in premarket trading.
Amazon (AMZN) also missed analyst projections for sales and profit. Its stock is down 4.5% in premarket trading. “Disruption to the global supply chains and inflation in the cost of materials such as steel and services such as trucking have also raised our cost of operations,” said Brian Olsavsky, Amazon’s chief financial officer. Big picture: Even the largest companies in America can’t dodge the impact of clogged ports, missing parts and higher costs. That could hang over the final quarter of the year, which is crucial for retailers.
Amazon CEO Andy Jassy warned that the company’s consumer business expects to incur several billion dollars of additional costs in the current period. Apple expects its supply chain costs to keep growing, too. “We estimate the impact from supply constraints will be larger during the December quarter,” Luca Maestri, the chief financial officer, said. This week, the National Retail Federation said it thinks holiday spending will break records this year, growing between 8.5% and 10.5% compared to 2020. “There is considerable momentum heading into the holiday shopping season,” NRF President Matthew Shay said. “Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger.”