Amazon Refines Stores Formats, Exits Certain Stores With Low Growth Potential

E-commerce giant Amazon has announced plans to exit some fresh supermarkets and Go convenience stores as it is currently refining stores with low growth potential.

The company disclosed such a move was necessitated after it took a hard look at the store level in the fourth Quarter (Q4), where it plans to slow things down and also where it plans to get out of some leases.

As part of a periodic assessment of its grocery portfolio, the company decided to exit certain stores. It also took a $720 million impairment charge in the fourth quarter.

Speaking on the company’s plan to close some fresh supermarkets and Go convenience stores, Amazon’s finance Chief Brian Olsavsky said “We are 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”.

The company’s CEO Andy Jassy stated that the earnings call reveals Amazon’s stores need to resonate with customers, noting that the company needs to be in a better position.

He further disclosed that the company is optimistic about positive revenue growth in 2023, as it sees some encouraging signs, and when it finds the equation, there will be an expansion.

Amazon currently operates several dozen fresh grocery stores and 28 Amazon Go convenience stores.

Investors King understands that last month, the e-commerce giant closed one of its London fresh stores and opened another elsewhere, in a sign that the company is cooling its grocery retail expansion plans for the capital.

The tech giant saw physical store sales climb in the fiscal 2022 fourth quarter (Q4) and full year as it posted strong overall sales gains for both periods.

Meanwhile, 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.

Signals of a slowdown by Amazon trying to balance growth efforts and control costs amid a gloomy 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.

Still, the company’s CEO Andy Jassy and other Amazon executives have described the Store’s business, including grocery, as one of the units with big opportunities ahead.