Amazon sees pandemic as a further increase in sales after record profit

Amazon on Thursday forecast an increase in Christmas sales and costs related to COVID-19 as consumers continue to shop more online during the pandemic.

A company executive added that increased spending on delivery infrastructure was likely to last for years, and stocks in over-the-counter trading fell 2 percent.

Since the virus outbreak began in the US eight months ago, consumers have increasingly turned to Amazon for food, housewares and medical supplies. Shops closed their doors; In contrast, Amazon hired more than 4,000,000 people and earned $ 6.3 billion (around Rs.46,700) in the past quarter. This was the second record win in a row.

This means that the world’s largest online retailer has remained at the center of the workplace and political turmoil. Democratic politicians this month accused Amazon of having “monopoly power” over retailers on its platform, which the company denies. Meanwhile, more than 19,000 U.S. Amazon employees have signed COVID-19, and some employees have protested the closings of locations.

Amazon’s response now includes an estimated $ 4 billion (approximately Rs 29,825 million) in costs related to COVID-19 this vacation, compared to $ 2.5 billion (approximately Rs 18,640 billion) in the last quarter. It tests employees for the virus and procures protective equipment for new hires. According to Brian Olsavsky, chief financial officer, the company is working less productively due to the social distancing in its warehouses, which is a large part of its pandemic costs.

According to research firm FactSet, Amazon forecast an operating profit of between $ 1 billion (around 7,400 million rupees) and $ 4.5 billion (around 33,500 million rupees), just under $ 5.8 billion (around 43,200 rupees) .

Competition for the company this vacation remains fierce in both retail and the cloud. Cloud computing division Amazon Web Services (AWS), a traditional ray of hope, is dueling with smaller rival Microsoft for companies with great potential during the pandemic, from remote working to cloud-based games.

In the past third quarter, AWS sales rose 29 percent, while Microsoft recorded a 48 percent increase in sales for its Azure cloud.

“Capacity bottlenecks”

Still, Amazon’s sales hit record levels. Jeff Bezos, managing director of Amazon and the richest person in the world, said in a press release: “We are seeing more customers than ever shopping early for their Christmas gifts. This is just one of the signs that this will be an unprecedented event.” Holiday season.”

The company reported that customers in its loyalty club, Prime, made more purchases, renewed their membership at higher rates, and turned to Amazon for video entertainment much more frequently internationally. Merchants also expanded their advertising budgets on Amazon in the third quarter from a decline during the springtime pandemic summit.

The question for some analysts was whether Amazon’s consumer division can keep up with the still growing purchases during the pandemic.

The company has long worked to avoid repeating the 2013 season, when delays left some without gifts on Christmas Day. Amazon is now handling more deliveries in-house and has postponed its Prime Day marketing event, usually in July, to October this year so customers can place vacation orders early.

CFO Olsavsky told reporters the company is “not completely isolated” from the challenges its delivery partners may face this quarter, despite the online retailer feeling ready for the holiday season.

“We believe that industry is running out of capacity and we are no exception,” he said. “It is up to the buyer to buy early.”

Olsavsky said on a call with analysts that Amazon’s fulfillment and logistics space would be 50 percent higher this year. He said the company had already invested a lot of money in expanding its transportation capacity, part of around $ 30 billion (around Rs.223,700 billion) in investments and leases in the third quarter. The increased transportation investments are likely to continue in the coming years, he said.

For the fourth quarter, Amazon expects net sales of 112 billion US dollars (around 8.35,300 rupees) to 121 billion US dollars (around 9.02,400 rupees). This would be the first company to top $ 100 billion in revenue (around Rs 7.45,800 billion), following a third-quarter revenue spike that analysts like eMarketer’s Andrew Lipsman hadn’t anticipated.

“While it was clear that the pandemic-induced move to e-commerce would push Amazon’s topline, it was surprising to easily beat an already high bar,” said Lipsman.

© Thomson Reuters 2020

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