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  HOME | Business & Economy (Click here for more)

Amazon Sales Soar on COVID-19, but Higher Costs Eat into Profits

SAN FRANCISCO – Amazon is one of the few enterprises to benefit from lockdowns implemented to contain COVID-19, but while the e-commerce titan’s sales increased 26 percent in the first quarter compared with the same period last year, profits fell 29 percent due to the increased costs of doing business in a pandemic.

Revenues grew from $59.7 billion to $75.5 billion year-on-year, according to the first quarter results Amazon presented Thursday.

Earnings, however, fell from $3.56 billion, or $7.09 a share, in the first three months of 2019, to $2.5 billion, or $5.01 a share. And the company warned investors to prepare for a bleak second quarter.

“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” founder and CEO Jeff Bezos said in presenting the results. “Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”

Since the start of the crisis, Amazon has hired an additional 175,000 employees in the United States alone and raised minimum hourly pay from $15 to $17, boosting its expenditures on personnel by roughly $500 million.

Sales in the US, which accounts for more than two-thirds of Amazon’s business, shot up 29 percent from last year’s level, while revenue from international operations climbed 18 percent.

The company’s cloud computing arm, Amazon Web Services, boosted sales 33 percent from $7.7 billion to $10.2 billion from $7.7 billion thanks to a surge in demand from firms that have their employees working remotely.

Looking ahead, Amazon management forecast second-quarter sales in the range of $75 billion to $81 billion. Regarding profitability, the firm said it could lose $1.5 billion and that the best scenario called for an operating profit of $1.5 billion.

Along with the sales bonanza, Amazon has reaped criticism from employees and politicians for failing to do enough to keep workers safe.

Late last month, Amazon began checking the temperature of employees reporting for work at its distribution centers across the US and now says that it is providing staff with masks and other personal protective equipment.

Amazon’s results fell short of analysts’ forecasts and the company’s stock price fell 4.84 percent in after-hours trading Thursday to $2,351.25 a share.

 

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