Virus expenses hit Amazon's bottom line

Revenues surge 26% in first three months of 2020 to more than $75 billion

SAN FRANCISCO: Amazon said on Thursday profits took a hit in the past quarter due to the global pandemic and that its earnings in the current period would be entirely wiped out by Covid-related expenses.

The technology and e-commerce giant said its revenues surged 26% in the first three months of 2020 to more than $75 billion, as people stuck at home due to the pandemic turned to it for supplies and entertainment.

But profits slipped 29% from a year ago to $2.5 billion for the giant which has been both a lifeline for consumers and a target for some activists.

Chief executive Jeff Bezos said all profits in the April-June quarter would be erased by expenses linked to the global virus outbreak.

"In this coming Q2, we'd expect to make some $4 billion or more in operating profit," Bezos said.

"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."

Amazon has become a lifeline for consumers facing lockdowns and restrictions around the world, and the company is in the process of adding some 175,000 new employees to cope with surging demand.

But the company has also faced protests from warehouse workers and activists who claim Amazon has failed to do enough to keep them safe.

Shares in the Seattle-based company slipped some 4.2% in after-hours trades that followed release of the earnings report.

Bezos said that "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 has been scrambling to keep up with demand for supplies and groceries, including from its Whole Foods grocery chain, amid strains in getting and delivering goods.

The e-commerce leader has been prioritising "essential items" such as household staples and medical supplies, while working to stem price-gouging from third-party sellers.

Chief financial officer Brian Olsavsky said it was difficult to predict when demand would return to normal levels and Amazon would move forward in implementing its one-day shipping plans.

"Right now things are still so up in the air that I can't really project when that day will be," he said.

Published in The Express Tribune, May 2^nd, 2020.

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