In Europe, consumer businesses like Amazon face holiday reckoning

Amazon.com Inc (AMZN.O), the global retailer whose results can represent a bellwether for the e-commerce industry, on Thursday signaled a pain point for sales this holiday season: Europe.

Forecasting its slowest revenue growth for any holiday in years, Seattle-based Amazon said economic turbulence has hit European consumers hard and cut into their household budgets. At the same time, the cost of delivery for retailers like itself has risen across the Atlantic.

Shares in the company cratered 12% in extended trade to wipe about $140 billion off its market capitalization, reflecting lower sales growth in its cloud-computing division as well.

The extraordinary plummet put Europe in the spotlight for a company typically hurting from expansion in more emerging markets. Germany and Britain are its biggest markets after the United States.

Brian Olsavsky, Amazon’s chief financial officer, told reporters: “Fuel cost and the impacts of the Ukraine war are hitting the economies in Europe even harder than the U.S., and that’s showing up in consumer spend.”

European Union energy ministers are set to discuss a possible bloc-wide gas price cap, the fourth such emergency debate since July. Russia’s invasion of Ukraine, a major grain exporter, earlier fanned worries about food shortages.

Britain, meanwhile, is facing recession and higher interest rates to halt double-digit inflation. A recent week of credit and debit-card data showed Britons spending even less than prior to the pandemic, and luxury and furniture sales were particularly weak.

“Consumer sentiment in Europe is at an all time low,” Unilever PLC (ULVR.L) Chief Financial Officer Graeme Pitkethly told reporters, warning likewise of rising inflation and depleted household savings.

The U.S. dollar has steadily gained on the Euro, adding $900 million in foreign-exchange headwinds to Amazon alone, which it did not anticipate a few months ago. The company’s operating loss for its international segment, hurt by higher European delivery expenses, ballooned to $2.5 billion in the third quarter from $0.9 billion a year prior.

Not every company has seen as big a dent. Mastercard Inc’s (MA.N) chief financial officer said Thursday that the credit card provider so far noticed little change in European consumer spending volumes.

Still, a wide range of multinational companies have warned of weakness in European markets. Comcast Corp, for instance, (CMCSA.O) on Thursday said the challenging economy there would hit one of its units, British broadcaster Sky, in the fourth quarter.

California Wedbush Securities analyst Michael Pachter said currency changes were creating divergent paths for U.S. and European consumers.

“We benefit in the U.S. from a strong dollar, meaning imports are cheap,” he said. “Their currency is weak, so imports are super expensive.

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