Amazon Sees Pandemic Further Boosting Sales After Record Profit
Amazon forecast an increase in holiday sales and COVID-19-related costs on Thursday, as consumers continued to buy more online during the pandemic.
A company executive added that increased spending on delivery infrastructure is likely to continue for years, with shares falling 2 percent in after-hours trading.
Since the start of the virus outbreak in the United States eight months ago, consumers have increasingly turned to Amazon for the delivery of groceries, household items and medical supplies. Physical stores closed their doors; Amazon, by contrast, moved to recruit more than 4,00,000 workers and earned $ 6.3 billion (roughly Rs. 46.7 billion rupees) in the quarter that just ended, its second consecutive record profit.
That has kept the world’s largest online retailer at the center of the workplace and political turmoil. Democratic politicians this month accused Amazon of having “monopoly power” over merchants on its platform, which the company disputes. Meanwhile, more than 19,000 of Amazon’s American employees hired COVID-19and some staff members protested the site’s closure.
Amazon’s response now includes an estimated $ 4 billion (roughly Rs. 29,825 crore) in COVID-19-related costs this holiday, up from $ 2.5 billion (roughly Rs. 18,640 crore) last quarter. You’re testing employees for the virus and getting protective gear for new hires. It is also working less productively due to social distancing at its warehouses, which accounts for a large part of its pandemic spending, CFO Brian Olsavsky said in a call with reporters.
Amazon forecast an operating profit of between $ 1 billion (roughly Rs. 7.4 billion rupees) and $ 4.5 billion (roughly Rs. 33.5 billion rupees), less than $ 5.8 billion (roughly Rs. 43.2 billion rupees) that analysts were looking for, according to research firm FactSet.
Competition this holiday continues to be fierce for the company in the retail and cloud sectors. A traditional bright spot, cloud computing division Amazon web services (AWS) is dueling a smaller rival Microsoft for companies with great potential during the pandemic, from remote work to cloud-based gaming.
In the third quarter that just ended, AWS sales grew 29 percent, while Microsoft reported a 48 percent increase in revenue from its Azure cloud.
Still, Amazon’s sales are shaping up to hit a record high. Jeff Bezos, Amazon’s CEO and the world’s richest person, said in a press release: “We’re seeing more customers than ever buy their holiday gifts early, which is just one of the signs that this will be a holiday season. without precedents. . ”
The company reported that the clients of its loyalty club principal they were shopping more frequently, renewing their membership at higher rates and, internationally, turning to Amazon much more for video entertainment. Merchants also expanded their advertising budgets on Amazon in the third quarter in the face of a contraction during the spring peak of the pandemic.
The question for some analysts has been whether Amazon’s consumer division can keep up with the purchases that continue to grow during the pandemic.
The company has long worked to prevent a repeat of the 2013 season when delays left some without gifts on Christmas Day. Amazon now handles more home deliveries, and this year it moved its marketing event Prime day, generally July through October, allowing customers to order for the holidays in advance.
Chief Financial Officer Olsavsky told reporters that the company “is not totally insulated” from the challenges its delivery partners may face this quarter, although the online retailer feels ready for the holiday season.
“We believe there will be capacity shortages across the industry and we are no exception,” he said. “Buyers should buy early.”
Olsavsky said in a call with analysts that Amazon’s square footage of logistics and fulfillment would be 50 percent higher this year. He said the company has already spent a lot on expanding its transportation capacity, part of some $ 30 billion (roughly Rs. 2.23.7 billion rupees) in capital expenditures and leases during the third quarter. The increased investment in transportation will likely continue for years to come, he said.
For the fourth quarter, Amazon said it expects net sales of $ 112 billion (roughly Rs. 8,35,300 crore) to $ 121 billion (roughly Rs. 9,02,400 crore). That would mark the company’s first at more than $ 100 billion (roughly Rs. 7.45.8 billion rupees) and follows an improvement in third-quarter revenue that analysts like eMarketer’s Andrew Lipsman weren’t expecting.
“While it was clear that the pandemic-driven shift to e-commerce would keep Amazon’s top line high, it was surprising by easily surpassing an already high bar,” Lipsman said.