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Rating Action:

Moody's upgrades Amazon to A1

10 May 2021

New York, May 10, 2021 -- Moody's Investors Service ("Moody's") today upgraded Amazon.com, Inc.'s ("Amazon") senior unsecured rating to A1 from A2, assigned an A1 rating to the proposed senior unsecured debt offering, and affirmed the Prime-1 commercial paper rating. The outlook is stable.

"Today's rating actions recognize the continuing strength in Amazon's operating performance in all three of its operating segments, both from revenue growth and margin improvement perspectives, which is impressive given the surge in retail volumes due to the pandemic," stated Moody's Vice President Charlie O'Shea. "The predictability of AWS' performance, with operating income that will approach $18 billion for 2021, provides increasing support as the retail business continues with its robust investments," continued O'Shea. "Liquidity remains excellent, and Moody's is confident that the upcoming change in CEO from Jeff Bezos to Andy Jassy will be seamless, and result in no meaningful strategic shifts," added O'Shea. "The new debt offering will be used to support Amazon's myriad growth investments. While it temporarily increases leverage, it is expected to be deployed over time for growth capex, which is a long-term positive," added O'Shea.

Assignments:

..Issuer: Amazon.com, Inc.

....Senior Unsecured Regular Bond/Debenture, Assigned A1

Upgrades:

..Issuer: Amazon.com, Inc.

....Senior Unsecured Shelf, Upgraded to (P)A1 from (P)A2

....Senior Unsecured Regular Bond/Debenture, Upgraded to A1 from A2

..Issuer: Whole Foods Market, Inc.

....Senior Unsecured Regular Bond/Debenture, Upgraded to A1 from A2

..Issuer: CLOUD PASS-THROUGH TRUST 2019-1

....Senior Secured Enhanced Equipment Trust, Upgraded to A1 from A2

Affirmations:

..Issuer: Amazon.com, Inc.

....Senior Unsecured Commercial Paper, Affirmed P-1

Outlook Actions:

..Issuer: Amazon.com, Inc.

....Outlook, Changed To Stable From Positive

..Issuer: Whole Foods Market, Inc.

....Outlook, Changed To Stable From Positive

..Issuer: CLOUD PASS-THROUGH TRUST 2019-1

....Outlook, Changed To Stable From Positive

RATINGS RATIONALE

Amazon's ratings continue to recognize its powerful brand, which is synonymous with online retail throughout most of the world, as well as the strength and profitability of Amazon Web Services ("AWS"). AWS accounts for the majority of the company's operating income and free cash flow supporting Amazon's ability to make strategic investments in its retail operations. In addition to its leading competitive position in both online retail and web services, Amazon also has a solid ecosystem of entertainment content and a formidable third-party seller business. Ratings also consider the present environment, where the coronavirus pandemic is creating both positives and negatives for Amazon, with significantly increased revenue but at the same time increased expenses, particularly fulfillment and shipping, a trend Moody's expects will continue throughout 2021 and beyond. Shipping costs for the March 2021 LTM continue to grow and increase as a percentage of non-AWS revenues, with costs of $67.5 billion representing almost 19% of non-AWS revenue, reflecting the surge in demand, especially among Amazon's critical Prime members. Ratings are also supported by Amazon's significant free cash flow generation and excellent liquidity profile, and Moody's notes that cash and marketables of around $73 billion at Q1 2021 benefit from $40 billion in favorable working capital. Ratings also consider Amazon's historically conservative financial strategy with respect to shareholder returns balanced by limited visibility into its dynamics, and the potential pressure on operating profit due to the level and cadence of investment funding for various growth initiatives. In addition, ratings also consider the present short-term pressure due to coronavirus expenses and strain on logistics from the surge in online volume, the increased online competition from brick-and-mortar retailers, as well as the increasing competitive threats from larger, better-capitalized companies in AWS' universe.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Moody's view that the current generally favorable operating performance of the company, especially on the AWS side, will continue, and there will be no meaningful shifts in either business or financial strategy as a result of the upcoming CEO transition. Ratings could be upgraded if Amazon's numerous investments generate commensurate levels of profitability over time such that RCF/debt is maintained around 65%. Additional factors that would be critical for an upgrade are continued maintenance of excellent liquidity and no major deviation from current performance, or any substantive changes in operating or financial strategies. Ratings could be downgraded if it becomes clear that investments are not paying off, or that financial strategy is becoming significantly more aggressive with regard to cash returned to shareholders or acquisitions, which would be evidenced by RCF/debt falling below 50% for an extended period.

The principal methodology used in these ratings was Retail Industry published in May 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Seattle, Washington, Amazon.com, Inc. is the world's largest online retailer and a leading provider of cloud computing services. LTM March 2021 revenues were $422 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Charles O'Shea
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Margaret Taylor
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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