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Amazon stock falls after another round of Trump rants

(LATimes)– Amazon.com Inc. stock fell Monday after a fresh round of critical comments from President Trump and a Republican senator.

In his latest Twitter rant Monday, Trump said: “Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed. Also, our fully tax paying retailers are closing stores all over the country….not a level playing field.”

Trump has been unrelenting in his criticism of Amazon in the last several days, on subjects including the Postal Service, taxes and retailing. In a pair of Twitter messages Saturday, Trump said Amazon “must pay real costs (and taxes) now!”

The president also claimed, citing reports he didn’t specify, that the U.S. Postal Service “will lose $1.50 on average for each package it delivers for Amazon” and added that the “Post Office scam must stop.” Amazon has said the postal service — whose financial problems stretch back years — makes money from Amazon’s packages because the company does most of the processing itself.

Sen. Marco Rubio, a Republican from Florida, jumped in with his own tweet Monday morning, saying Amazon has brought Americans lower prices but could hurt competition in the long term. “Potential ‘new economy’ monopolies will require close monitoring,” Rubio said.

Amazon shares fell 4.1% to $1,388.40 at around 8 a.m. PDT. The Standard & Poor’s 500 index was down about 1.6%.

Amazon shed $53 billion in market value Wednesday after Axios reported that the president is “obsessed” with regulating the e-commerce giant, whose founder and chief executive, Jeff Bezos, also owns the Washington Post newspaper.

White House spokeswoman Lindsay Walters said Thursday that while the president was displeased with the e-commerce giant, and particularly instances where third-party sellers on the site didn’t collect sales tax, there were no administrative actions planned against Amazon “at this time.”

Still, Brad Parscale, who is managing Trump’s 2020 presidential campaign, hinted in a tweet late Thursday that the administration may act to raise Amazon’s postal costs, which are negotiated with the Postal Service. “Once the market figures out that a single @usps rule change will crush @amazon’s bottom line we will see,” Parscale wrote. “Doubt if the @washingtonpost will ever report the truth about @Amazon’s government subsidy.”

Amazon.com and the Washington Post have been regular punching bags for Trump. In July, the president mused about whether the newspaper was “being used as a lobbyist weapon” to keep Congress from looking into Amazon’s business practices. He echoed that comment Saturday, calling the Post “fake” and saying it “is used as a ‘lobbyist’ and should so REGISTER.”

Trump spent Easter weekend at his resort in Palm Beach, Fla., and arrived at the nearby Trump International Golf Club early Saturday, just after the tweets were published. He also criticized Amazon over Twitter during his winter vacation at Mar-a-Lago, saying in December that the postal service “should be charging MUCH MORE for package delivery.”

Amazon regularly uses the postal service to complete what’s called the “last mile” of delivery, with letter carriers dropping off packages at some 150 million residences and businesses daily. It has a network of more than 20 “sort centers” where customer packages are sorted by ZIP Code, stacked on pallets and delivered to post offices for the final leg of delivery.

Although full details of the agreement between Amazon and the U.S. Postal Service are unknown — the mail carrier is independently operated, and it strikes confidential deals with retailers — David Vernon, an analyst at Bernstein Research who tracks the shipping industry, estimated in 2015 that the USPS handled 40% of Amazon’s volume the previous year. He estimated at the time that Amazon pays the postal service $2 per package, which is about half what it would pay United Parcel Service Inc. or FedEx Corp.

A sudden increase in postal rates would cost Amazon about $2.6 billion a year, according to a report by Citigroup from April 2017. That report predicted UPS and FedEx would also raise rates in response to a postal service hike.

Citigroup also said that the “true” cost of shipping packages for the USPS is about 50% higher than its current rates, leading some editorial writers to conclude that Amazon was receiving the type of subsidy cited in Trump’s Thursday tweet.

But the postal service’s losses have little to do with Amazon and more to do with its large healthcare obligations and the dwindling use of first-class mail. The post office charges some of the world’s lowest stamp prices.

“The Postal Regulatory Commission has consistently found that Amazon’s contracts with the USPS are profitable,” Amazon said in a statement. “Amazon has invested hundreds of millions of dollars in a network of more than 20 package [sorting] facilities that inject directly into the USPS last mile network bypassing most of USPS network. This investment resulted in more efficient processes as well as thousands of jobs and related economic benefits in local communities.”

Trump’s tweet also assumes that Amazon would be forced to pay if the Postal Service increased its rates for packages. But Amazon has been setting up its own shipping operations in the U.S. and elsewhere in the world to minimize costs.

Under a new service being rolled out this year, Amazon would oversee the pickup of packages from warehouses of third-party merchants and deliver to home addresses.

Source:: LATimes

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