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Amazon’s sales rise, profits fall in Q1

SEATTLE, Wash. — Amazon.com posted strong sales gains in the first quarter, as consumers forced to stay at home have responded by shopping and spending more with the e-commerce giant. At the same time, Amazon’s costs have risen sharply as well, hurting profits.

Net sales increased 26% to $75.5 billion in the first quarter, compared with $59.7 billion in first quarter of 2019. Excluding the $387 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 27% compared with first quarter of 2019.

But Amazon reported operating income $4.0 billion in the first quarter, down from $4.4 in last year’s first quarter. Net income decreased to $2.5 billion in the first quarter, or $5.01 per diluted share, compared with net income of $3.6 billion, or $7.09 per diluted share, in first quarter of 2019.

“From online shopping to AWS 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,” Amazon founder and CEO Jeff Bezos said in a statement.

For the second quarter, Amazon expects net sales of between $75 billion and $81 billion, which would represent growth of between 18% and 28% compared with the second quarter of 2019. This guidance anticipates an unfavorable impact of approximately 70 basis points from foreign exchange rates.

The company is projecting that operating income in the quarter will range from a loss of $1.5 billion to a positive $1.5 billion, down from from an operating income of  $3.1 billion in the second quarter of 2019. This guidance assumes approximately $4 billion of costs related to COVID-19.

“Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention, and money,” Bezos emphasized. “If you’re a share owner in Amazon, you may want to take a seat, because we’re not thinking small. 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.

“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.

“There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.”

The post Amazon’s sales rise, profits fall in Q1 appeared first on MMR: Mass Market Retailers.



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