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Amazon Q1 2020 Earnings: Roaring Sales Overshadowed By Coronavirus Costs

As for Q2 2020, Amazon is telling investors, “You may want to take a seat.”

By Adriana Lee on April 30, 2020

What would have been a gangbusters first quarter of 2020 for Amazon was undercut by increased costs due to the coronavirus crisis.

Sales during the period ending in March topped consensus estimates, while profits failed to meet expectations.

Net sales of $75.5 billion beat the $73.74 billion anticipated and soared above the $59.7 billion garnered this time last year, amounting to 26 percent growth year-over-year. But earnings per share of $5.01 fell short of the $6.27 expected and landed far below the $7.09 from the first quarter of 2019, making for a 30 percent drop.

The news isn’t entirely shocking. Online purveyors — especially of goods seen as essentials, such as prescriptions, groceries and household products — have been swamped due to stay-at-home orders and erratic, sometimes nonexistent, inventory levels at supermarkets.

Amazonhas been among the most popular options for online shoppers, but even thee-commercegiant’s vast sourcing, logistics and delivery network appeared to heave under the weight of demand. The company unveiled plans to hire as many as 100,000 workers early in the health crisis, then after filling those slots in a matter of weeks, announced an additional hiring push for another 75,000 spots.

The e-tailer was besieged by numerous issues, from warehouse worker protests over health and safety measures and demands for higher pay to elongated shipping times for some nonessential products.

“From online shopping to AWS [Amazon Web Services] to Prime Video and Fire TV, the current crisis is demonstrating the adaptability and durability of Amazon’s business as never before, but it’s also the hardest time we’ve ever faced,” said Jeff Bezos, Amazon founder and chief executive officer, in a statement.

Supporting customers, as well as its own workers, takes “skill, humility, invention and money,” he continued. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small.”

What he’s referring to is the $4 billion in operating profit Amazon expects in the second quarter, which the company plans to spend on coronavirus measures. 

“This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities.“

Amazon shares, which surged 32 percent in the year to date, broke records. But the admission that the company plans to spend $4 billion on coronavirus-related efforts appears to have shaken Wall Street, which sent shares down 5 percent in after-hours trading Thursday.

The bulk of the report covers the company’s response to the pandemic, but elsewhere in the organization, Amazon Web Services continues to be big business. While growth has been slowing in recent quarters, it’s still a $10 billion operation, cementing its place as a priority focus for Amazon. 

Prime subscription services got a boost, going up 28 percent to $5.56 billion. And Amazon’s “other” category — read: advertising — grew 44 percent, raking in $3.91 billion in revenue.

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