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Yesterday Jan 3, Amazon borrowed another $8B at 0.75% plus SOFR (which is basically Fed Funds rate at ~4.3%) through a short term credit facility. Also, Amazon

Yesterday Jan 3, Amazon borrowed another $8B at 0.75% plus SOFR (which is basically Fed Funds rate at ~4.3%) through a short term credit facility. Also, Amazon has ~$69B in long term lease liabilities. That’s about ~3x the combined long term lease liabilities of Walmart and Costco (~$20B combined). Walmart and Costco are the world’s #1 and #3 retailer, Amazon being #2. From the beginning when Jassy took the job, the problem has always been the cost of the excess warehouse capacity. Once they realized the true demand from this holiday season, they can now rightsize capacity for 2024 and beyond. Until then, they need to tighten the belt. Just like if you realized you swallowed a bigger mortgage than you can handle. “The last issue relates to our fixed cost leverage. Despite still seeing strong customer demand and expansion of our FBA business, we currently have excess capacity in our fulfillment and transportation network. Capacity decisions are made years in advance, and we made conscious decisions in 2020 and early 2021 to not let space be a constraint on our business.” - Brian Olsavsky CFO Apr 28, 2022 earnings call

roncesvalles 4y ago
>Also, Amazon has ~$69B in long term lease liabilities. That’s about ~3x the combined long term lease liabilities of Walmart and Costco (~$20B combined). Walmart and Costco are the world’s #1 and #3 retailer, Amazon being #2. Long term lease liabilities are next to meaningless for any kind of analysis because it's the sum of rent due at any point after the next 12 months. Could be at the 13th month. Could be at the 13th year. I am not an accountant but I believe you could sign a 50 year lease at $1m/year, that can be terminated at any time by paying a $1m penalty, and it would still show up as a $49m long term "liability".
- snake_doc 4y ago
  Instead of your speculation, let me be the expert to explain your speculation is wrong. 1. ASC 842 states that lease liabilities should be measured by lease terms that are non-cancellable. In this case, these are Amazon’s non-cancellable leases. 2. The average lease term remaining is ~9-11 years for Amazon. 3. Lease liabilities are present value calculations, ie. They are not as you suggested 50 years x $1M/yr. They represent the present value of the discounted cash flows. The discount rates are disclosed. Leases notes from latest Amazon 10-Q: https://www.bamsec.com/filing/101872422000023/1?cik=1018724&table=20 https://www.bamsec.com/filing/101872422000023/1?cik=1018724&...

roncesvalles 4y ago

>Also, Amazon has ~$69B in long term lease liabilities. That’s about ~3x the combined long term lease liabilities of Walmart and Costco (~$20B combined). Walmart and Costco are the world’s #1 and #3 retailer, Amazon being #2. Long term lease liabilities are next to meaningless for any kind of analysis because it's the sum of rent due at any point after the next 12 months. Could be at the 13th month. Could be at the 13th year. I am not an accountant but I believe you could sign a 50 year lease at $1m/year, that can be terminated at any time by paying a $1m penalty, and it would still show up as a $49m long term "liability".

snake_doc 4y ago
Instead of your speculation, let me be the expert to explain your speculation is wrong. 1. ASC 842 states that lease liabilities should be measured by lease terms that are non-cancellable. In this case, these are Amazon’s non-cancellable leases. 2. The average lease term remaining is ~9-11 years for Amazon. 3. Lease liabilities are present value calculations, ie. They are not as you suggested 50 years x $1M/yr. They represent the present value of the discounted cash flows. The discount rates are disclosed. Leases notes from latest Amazon 10-Q: https://www.bamsec.com/filing/101872422000023/1?cik=1018724&table=20 https://www.bamsec.com/filing/101872422000023/1?cik=1018724&...