Amazon’s chief financial officer, Brian Olsavsky, told investors how much the company had to spend on severance payments.
At the beginning of the year, Amazon (AMZN) – Get a free reportjoined a host of other tech companies in announcing mass layoffs: Between November 2022 and the new round of cuts in January, more than 18,000 workers were laid off in what is the widest round of layoffs since the retail giant It was first released in 1994.
More than 2,300 workers were laid off in Amazon’s home state of Washington alone, while departments including payments, healthcare, human resources, robotics and web services were affected.
Amazon leaders blamed the layoffs on a “difficult economy” and the need to cut costs to maintain the company’s profitability.
“Companies that last a long time go through different phases”, CEO Andy Jassy wrote in a blog post on January 2. “They’re not in heavy people expansion mode every year.”
This is what Amazon had to pay laid off workers in severance pay
But as anyone who’s run a business knows, cutting costs isn’t as simple as saying you’re in “financial distress,” laying off a few people, and redirecting funds that would otherwise have gone to salaries where they’re needed most. Particularly for workers who have been with the company for a long time, severance payments can add up to a very considerable sum.
In a fourth-quarter earnings call, Amazon’s chief financial officer Brian Olsavsky said severance pay for the layoffs would cost the retailer an estimated $640 million.
“Considering the ongoing uncertainties of the macroeconomic environment, this led us to the difficult decision to cut just over 18,000 positions, primarily affecting our store and device businesses, as well as our human resources teams,” Olsavsky said. to investors. “(…) These charges were recorded primarily in technology and content, compliance and general administration on our income statement.”
Of course, the immediate costs are less significant than the long-term strategy. Olsavsky further said the layoffs are a long-term approach to help Amazon navigate a landscape where people have less money to spend on purchases.
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Tough times still lie ahead, Amazon says
While Amazon’s fourth-quarter earnings beat many analysts’ expectations with $149.2 billion in revenue, the company warned investors that operating profit could be as low as zero given lower spending and related high costs. with the creation of a cost reduction strategy for the future.
Another immediate charge was the $720 million Amazon decided to spend to close some of the brick-and-mortar stores that were found to have “low growth potential.”
“We are continually refining our store formats to find ones that will resonate with customers, build our grocery brand, and allow us to scale significantly over time,” Olsavsky said in the earnings call. “(…) We will also take an impairment of the capitalized costs and associated values of our leased buildings.”
Amazon is far from the only major tech company to report troubled economic conditions; Apple (AAPL) – Get a free reportand google (Google) – Get a free reportboth recently also posted lower-than-expected earnings amid individuals and advertisers tightening their belts amid fears of an impending recession.
Last month, Google also laid off more than 12,000 workers as a measure of cost and has has faced subsequent protests both over job cuts and stagnant wages among employees who remained.
At $104.66 as of Friday afternoon, Amazon shares are down nearly 25% from last year, but are up 21.95% since the start of the year in January. When the large-scale layoffs were announced, the stock sank to $83.12.
