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Amazon Launches Prime Day Amid Retail Sales Pullback, Hot Competition

Amazon's Prime Day could outpace Black Friday sales, but stiffer competition and tighter consumer belts could ping sales over the two-day event.

Amazon  (AMZN) - Get Report shares edged higher Monday as the world's biggest online retailer launched its 2021 "Prime Day" shopping event amid a pullback in retail sales and a slower-than-expected recovery in the job market.

Amazon, which brought its seventh annual two-day shopping event forward this year in the hope of sparking a spending boost amid a traditionally quiet June, is also facing intense competition from online rivals such as Target  (TGT) - Get Report and Walmart  (WMT) - Get Report for a slice of the $10 billion in gross merchandise volumes it booked last year. 

That could be a tough ask for all three -- as well as the smaller retailers looking to offer heavy discounts to online shoppers over the next 48 hours -- as U.S. consumers continue to tighten their belts heading into the summer months as gas prices rise firmly past the $3 per gallon mark and the tailwind from the $1,200 checks linked to the American Rescue Act fades and consumer prices surge the most in more than a decade.  

It’s Prime Day: What Wall Street Thinks Of Amazon Stock

May retail sales fell by a more-than-expected 1.3% to a collective $620.2 billion, the Commerce Department said last week, as headline CPI was pegged at 5%, the highest since 2008. 

Job growth is also sputtering, with non-farm payroll tallies for both April and May falling well below Wall Street forecasts and JOLTS job openings showing the largest unfilled positions total -- 9.3 million -- on record.

Still, JPMorgan analysts still expect gross merchandise value (GMV) to rise 10.4% from last year to around $11.6 billion, a figure that would add around $6 billion in revenue to Amazon's overall second quarter tally.

"Prime Day’s financial benefit also extends far beyond the 2-day period through the conversion of new Prime subs & addition of third-party sellers to the platform," said JPMorgan analyst Doug Anmuth, adding the company can also use the event to gauge back-to-school and second half shopping demand.

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"We believe this is important given Amazon may not be fully back to normal pre-pandemic delivery times, which places more pressure on AMZN & third-party delivery networks," he added. 

Amazon shares were marked 0.26% higher in pre-market trading Monday to indicate an opening bell price of $3,496.00 each. a move that would peg the stock's year-to-date gain at around 7.3%. 

Amazon isn't taking any chances with this year's two-day event, however, and moved to add some 75,000 new jobs across its fulfillment and transportation divisions last month, while boosting pay by between 50 cents and $3 per hour for its 500,000-strong workforce. 

It's also increased its fulfillment center square footage by more than 50% from last year's levels. 

Amazon is forecasting operating income of between $4.5 billion to $8 billion for the current quarter, on revenues in the range of $110 billion to $116 billion, following a first quarter blowout that included net income of $15.79 per share, more than triple last year's $5.01 total and revenues of $108.5 billion.

Amazon Web Services, the group's market-leading cloud business, saw net sales rise 32.1% to $13.5 billion, falling shy of the 50% gains recorded by rival Microsoft's  (MSFT) - Get Report Azure business earlier this week.

Physical store sales, Amazon said, fell 15.5% to $3.92 billion, while third-party seller services sales surged 63% to $23.709 billion. Online store sales rose 44.3% to $52.9 billion.

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