Amazon’s Cuts Were Inevitable After Years of Excessive Spending

It’s a bleak moment for the retail sector. Today brought word that home goods chain Bed Bath & Beyond has “substantial doubt” about its “ability to continue as a going concern,” given how much money it has been losing. Another retailer, Everlane, is cutting 17% of its corporate staff, we scooped today. Meanwhile, Amazon on Wednesday said it planned to cut more than 18,000 jobs, nearly double initial reports late last year of 10,000 cuts. All three retailers are struggling with a horrible economic environment. But Amazon’s woes are aggravated by its decision to spend like a drunken sailor over the past few years.

Just three years ago, Amazon was flush, thanks to the pandemic boom in online shopping. In 2020, for instance, the company generated $66 billion in cash from its operations, up 71% over 2019. That strengthened its balance sheet enormously: Amazon finished 2020 with $84 billion in cash, offset by nearly $32 billion in debt. Managed prudently, that net cash position of $52 billion should have positioned it to comfortably ride out any downturn. But Jeff Bezos, then the company’s CEO, never got anywhere by being cautious. So he embarked on an expansion that used much of Amazon’s cash reserves, weakening the company just as the e-commerce market tanked.