Amazon's 'Big Spring Sale' should help boost sales and increase profit margins
Amazon 's first spring sale event should help the online retailer get a jump on its rivals for the season and boost revenue for the first quarter. The " Big Spring Sale ," which starts Wednesday and runs through March 25, is expected to "drive stronger growth and defend its [Amazon's] competitive position," analysts at JMP Securities wrote in a note to clients. Bank of America estimates it could provide some upside to revenue for the quarter ending March 31, with incremental gross merchandise volume of $1 billion to $2 billion. Zev Fima, an analyst at the Investing Club, says a sales event on its own isn't a reason to buy the stock. "But we agree that any increase in volume is going to help margins because fixed costs are going to be spread out over more units, therefore increasing operating leverage," he said. The inaugural event, which is not restricted to Prime members, will feature daily deals for all customers, with spring fashion, fitness products, and outdoor furniture among the categories that will be discounted. Prime members, who pay $139 per year, or $14.99 a month, in the U.S., will enjoy exclusive access to special deals. Fima said the sale is likely to add more Prime subscriptions, which include free, fast shipping, video streaming, and access to Prime Day deals. Despite scheduling the event during a slower retail period, Bank of America said it could be a move to get ahead of the competition for selling spring products. The firm said Amazon is interested in increasing its share in the home goods category. Amazon assured customers can "shop confidently" and rely on the company's swift delivery service during the sales event. This spring sale mirrors the two-day Prime Big Deal Days event Amazon hosted in October 2023 to kick off the holiday shopping season. This spring event comes during an uncertain economic environment. Retail sales had a modest 0.6% growth in February after falling 1.1% in January. The lower-than-expected increase shows consumers have become more cautious with their spending. Adjusted for seasonal variation, spending at health and personal care stores dipped 0.3% for the month, while shopping at clothing stores dropped roughly 0.5%. To be sure, consumers have some wiggle room for discretionary purchases and spending on experiences. Electronics purchases and spending at restaurants and bars rose 1.5% and 0.4%, respectively, from January to February. However, it's worth noting that retail sales are not adjusted for inflation , which increased 0.4% in February. Increases in both energy and shelter costs accounted for more than 60% of the monthly increase in the consumer price index for all items, according to the Bureau of Labor Statistics. With this uncertain economic environment, Amazon said it will be offering up to 50% off select items including beauty products, electronics, apparel, and home products. A key factor for Amazon's success will be the company's regionalization strategy , which has not only increased shipping speed while driving costs down but has also led to market share gains. Amazon last year reached the fastest delivery speeds ever globally, with more than seven billion units arriving either the same day they were ordered or the next day. Management plans to get even faster in 2024 as it prioritizes efficiency in its fulfillment network while utilizing artificial intelligence to better predict which fulfillment center items should be placed according to customer demand. Amazon management said it will further reduce costs, allowing it to reinvest in speed improvements, lower prices, and improve profitability. (Jim Cramer's Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.