The Covid-19 pandemic has upended our lives, forcing us to live digital lives rather than physical ones.
Unsurprisingly, perhaps, Amazon.com Inc. reported soaring quarterly sales because of a surge in online orders from homebound customers contending with the coronavirus pandemic—as reported by The Wall Street Journal and Passive Guy.
The tech giant said Thursday that revenue rose 26% from a year earlier to $75.5 billion in the three months through March—by far the highest on record for what is usually Amazon’s slowest period of the year.
The boom in sales came at a cost, though: profit fell 29% from a year earlier to $2.5 billion, well short of analysts’ average estimate of $3.26 billion. Operating profit for the quarter also missed the estimate Amazon gave in January.
The results, which follow relatively robust earnings reports by several other big tech companies in recent days, reflect the central role Amazon has played during the coronavirus crisis, delivering goods to people stranded at home by government shelter-in-place orders.
The surge in online buying taxed Amazon’s fulfillment centers, which saw unprecedented volumes for this part of the year. In response, Amazon temporarily stopped taking inventory for products deemed nonessential and announced plans to hire 175,000 more staffers for its warehouses and delivery network. Amazon said it ended the quarter with 840,000 employees.
How are others doing?
Amazon’s results came on the same day Apple Inc. reported an unexpected uptick in revenue, with strong sales of services balancing out weakness in demand for iPhones and other devices.
Microsoft Corp., the world’s most valuable publicly-traded company, reported strong growth in quarterly sales and profit, with gains in areas from business software to videogame consoles.
Facebook Inc. and Google parent Alphabet Inc. also both reported higher profits and increased use of their services, though both saw weakening in their online advertising revenue as the pandemic spread.
Even so, and with the exceptions mentioned above, Amazon’s booming sales stand in stark contrast to many companies across the U.S. economy, which shrank in the first quarter at its fastest pace since the last recession: the Dow Jones Industrial Average has fallen nearly 15% this year.
The pandemic has broadly been a boon for sales at retailers with strong e-commerce abilities but devastated those that rely on bricks-and-mortar operations. Department-store chain J.C. Penney Co. Inc. is negotiating for bankruptcy funding and Macy’s Inc. has said it was furloughing most of its roughly 125,000 employees—though Macy’s said Thursday it plans to reopen some of its department stores next week in states that have loosened restrictions.
Why this matters to you
I agree with The Passive Guy that Amazon’s reliability and credibility as a seller may well be enhanced in the eyes of most buyers going forward. If this is correct, the “Don’t Buy from Nasty Amazon” meme so beloved by Big Publishing and many physical bookstores is going to lose even more credibility in the future.
This will improve its image with the public, especially since Amazon is willing to get through this Covid crisis by adding just about more employees than anyone else. Amazon expects to spend around $4 billion on coronavirus-related costs like employee testing and increased wages. It has already spent more than $600 million on such costs in the first quarter.
Amazon also spent heavily in the quarter hiring more employees and temporarily raising the pay of essential workers by $2 an hour.
This is paid, in part, by Amazon’s advertising business, which has up well, with sales in the latest quarter rising 43.8% from a year earlier to $3.9 billion. The unit, which sells ad space in the form of sponsored products in search and display ads, has become another cash cow for the company in recent years.
For all intents and purposes, it’s a good time to publish your book with Amazon!
As you know, I have been an Amazon cutomer from the beginning, and a product tester for many years too. I have no doubt that Amazon is literally 100% reliable, at least in the UK. I have rarely had an issue with the company since it started, and they tend to resolve any complaints the same day.
However, I am not blind to the more worrying aspects of an operation that makes that work so well. No trade union agreements, some staff on limited contracts, and pressurised working conditions that leave many staff members exhausted and stressed.
There is always another side to making life so easy for us customers.
Best wishes, Pete.
A balanced view, Pete, as I expected from you. These worries have been voiced for a while now. My point was that people may be more forgiving towards Amazon thanks to its COVID performance. I’m curious to see how it plays out.