Andy Jassy just wrapped up a turbulent first year as Amazon CEO

Andy Jassy celebrates his first anniversary as CEO of Amazon on Tuesday. Party is probably not the key word.

Jassy, ​​a 25-year Amazon veteran, took over from Jeff Bezos on July 5, 2021. Days later, the stock hit a record high. Since then, it has fallen more than 40%, including a 35% drop in the second quarter, the biggest drop of any period since 2001.

As Amazon’s second CEO since Bezos created the company in 1994, Jassy is grappling with a macroeconomic hurricane entirely beyond his control. From continued fallout from the Covid-19 pandemic, record inflation and rising interest rates to supply chain constraints and war in Ukraine, Amazon faces the prospect of rising costs and slowing consumer spending, as investors turn away from the tech stocks that drove the recent bull market.

But it’s not just the economy. There’s also the threat of antitrust regulation as lawmakers move closer to passing landmark legislation that aims to limit the power of Amazon and other tech giants. And Jassy is embroiled in a labor battle that culminated in a Staten Island warehouse voting in April to form the company’s first U.S. union. Amazon is challenging the union effort in court. Meanwhile, some of the company’s top executives have reached the exits.

Last July, when Jassy officially took over as CEO, Amazon’s business was stronger than ever. The company had just completed its $100 billion first quarter, reflecting the surge in e-commerce business caused by the pandemic that has driven Amazon to expand at a blistering pace.

The story unfolded quickly. Amazon is now losing some of the warehouse space it added during the pandemic. And after months of labor shortages, the company is now overstaffed in its distribution network as cooling e-commerce means many recent hires are no longer needed.

With its core business slowing, Amazon announced in April that it posted its weakest quarterly revenue growth since the dot-com meltdown in 2001, and its first quarterly loss since 2015.

Investors are now wondering if the poor results reflect management’s struggles or just a brief setback as the company emerges from a global pandemic and reckon with a sluggish economy.

When asked if Jassy was responsible for Amazon’s over-expanding warehouses and recent business weakness, DA Davidson analyst Tom Forte said the new CEO still benefits from the doubt.

“Today I still feel like the answer is no,” said Forte, who recommends buying the stock. “But I’m watching if there’s a multi-year period of sustained weakness in the stock, at which point will investors start to look to Andy and blame.”

Forte is not alone. Following the company’s first-quarter earnings report, several Wall Street analysts said Amazon’s challenges should resolve themselves over the next few months.

But with a workforce of more than 1.6 million people and an investor base that expects operational excellence, Jassy has a lot to prove no matter where the economy goes.

“My fundamental belief is that large companies face the greatest risks internally,” Matt McIlwain, managing director of Madrona Venture Group in Seattle and longtime investor at Amazon, said in an email. “The key for Amazon will be to continue to embrace its pioneering culture and make decisions with speed/agility so they can continue to grow at scale.”

Labor issues aren’t expected to go away any time soon.

Since the union victory in Staten Island, Amazon has fought back aggressively against other organizing efforts and has firmly maintained its opposition to unions. Following reports of unsafe working conditions in its warehouses, Jassy said Amazon’s injury rates were “sometimes misunderstood,” but he acknowledged Amazon could do more to improve injury rates across the board. its facilities.

“We’ve researched and created a list of what we believe are the top 100 employee experience pain points and are systematically addressing them,” Jassy wrote in his first letter to shareholders in April.

Office workers have their own set of demands and have gained considerable influence, demanding higher wages, better benefits and greater flexibility of working from home. Last October, Amazon withdrew from its office-centric culture by allowing individual managers to decide how often their employees would be required to come into the office.

Earlier this year, in response to the strengthening job market, Amazon raised its maximum base salary to $350,000 from its previous maximum of $160,000.

That’s not enough to keep some of the company’s oldest employees, who have left at a rapid pace. The trend predated Jassy’s tenure. More than 45 senior executives left Amazon between the start of 2020 and April 2021, according to a tally by Business Insider, an unusually high number for the company.

Under Jassy the exodus continued. Last month, 23-year-old Amazon veteran Dave Clark resigned just over a year after taking over the retail chief job from Jeff Wilke, one of Bezos’ top lieutenants. who stepped down in early 2021. Later in June, two prominent black leaders — Dave Bozeman, chief operating officer, and Alicia Boler-Davis, senior vice president of global customer satisfaction and a member of the executive team at the company – announced their departure.

Ian Freed, a former Amazon vice president who oversaw the development of key projects like Alexa and the Kindle, said as the company grows it may become more difficult to attract and retain the same type. talented.

“The fact that it’s growing, it’s a desirable place for innovators, whether they’re engineers or marketers or retail or whatever, if that goes away I feel like a lot of things are starting to fall apart,” Freed said. “I don’t necessarily think it’s going to go away, but I think it’s still the biggest risk.”

In his 2014 letter to shareholders, Bezos outlined three areas of Amazon that he often referred to as “pillars” of the company: Prime, Marketplace and Amazon Web Services.

In the years that followed, investors searched for a possible fourth or fifth pillar. They will now ask Jassy what can move the needle in a company with a market cap of $1.1 trillion.

Bezos has given the green light to ambitious projects like the Echo smart speaker and delivery drones, while taking on wacky and ambitious projects outside of Amazon, like investing $42 million to build “the clock of the long now”, which will tell the time for the next 10,000 years, and the creation of the Blue Origin spaceflight company.

Jassy’s big innovation was AWS. After serving as a “shadow” to Bezos in the early 2000s, Jassy was personally authorized by Bezos to start the cloud business, which grew into a $60 billion juggernaut and became the center of profit of the company.

“Andy is a visionary in his own right, but in a different way than Jeff,” Craig Berman, Amazon’s former vice president of global communications, said in an interview. “I think it would be horribly unfair to say that Jeff is a better innovator or builder than Andy.”

At Amazon’s general meeting in April, Jassy reminded employees that he “was here when we were just a book retailer.” From there, the company branched out into music, video, consumer electronics, cloud computing, devices and streaming entertainment, Jassy said at the meeting, a recording of which was obtained by CNBC.

As it explores new markets, Jassy said the company asks if the opportunity is big enough, if it’s well-served, if Amazon has a “differentiated approach” and if it has confidence or “can we acquire confidence quickly?”

“If we like the answers to these questions, we’ll pursue this opportunity, even if it’s really different from what we’ve done in the past,” Jassy said. “And that philosophy has been what you see in the various customer experiences and business segments that we’ve pursued.”

LOOK: Full CNBC interview with Amazon CEO Andy Jassy