There go the profits. Amazon to spend $4B on coronavirus response.
Amazon.com reported higher revenues and lower earnings during the first quarter. The financial results were expected as the e-tailing and tech giant saw sales demand and expenses increase as it sought to keep up as the novel coronavirus across the U.S.
“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,” said Jeff Bezos, Amazon founder and CEO, in a statement.
Mr. Bezos and Amazon have encountered criticism from within and outside the company recently over everything from its ability to fulfill orders to the safeguards it has put in place to protect the health of workers in its fulfillment centers and Whole Foods stores.
“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” said Mr. Bezos. “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.”
Among the steps Amazon is taking to protect its workers and customers include acquiring 100 million face masks. All Amazon and Whole Foods associates, drivers and support staff are required to wear masks on the job. Within the next week, Whole Foods will also begin offering free disposable masks at store entrances to any customers who are not wearing one of their own.
In an interview with CNBC, Amazon CFO Brian Olsavsky said that Whole Foods saw a spike in sales in March. The grocery chain, which saw its physical same-store sales increase eight percent for the first quarter, was trending at about a one percent gain before the COVID-19 outbreak caused traffic to jump.
On an earnings call with analysts yesterday, Mr. Olsavsky addressed the logistical challenges Amazon is facing keeping up with increased demand online.
“It’s really a combination of how long it takes to get things in stock, picked, packed and shipped. The shipping is still pretty fast and is still coming quickly. It’s taking longer to get things into our warehouse and out of our warehouse. So that’s really the challenge right now is to speed that up,” he said.
- Amazon.com Announces First Quarter Results – Amazon.com
- Making masks available to Whole Foods Market customers nationwide – Amazon.com
- Amazon’s COVID-19 blog: daily updates on how we’re responding to the crisis – Amazon.com
- Amazon.com, Inc. Q1 2020 Results (Earnings Call Transcript) – Seeking Alpha
- ‘If you’re a shareowner in Amazon, you may want to take a seat’ — Amazon reports earnings, plans to spend all Q2 profits on coronavirus response – CNBC
DISCUSSION QUESTIONS: How well do you think Amazon has responded to the coronavirus outbreak in comparison to its “essential” retailing peers? Will Amazon’s announced investments to protect workers and customers help the company gain favor within and outside its organization?