In the middle of Covid-19, Amazon's Q1 2020 earnings confirm e-commerce dominance


On April 30, Amazon announced its first quarter 2020 results. As expected, total revenue for the three months ended March 31 was exceptionally strong – about $ 33 million per hour in sales.

Financials

Revenues increased, but net revenues declined from year to year, with the company attributing to increased product acquisition costs and high shipping costs. Filling costs increased by more than 34 percent from the year to $ 11.5 billion and sales costs increased by 30.5 percent to $ 44.3 billion.

Amazon's net sales of $ 75.5 billion increased by 26 percent in the first quarter of last year, but net income decreased by 10 percent – $ 4 billion compared to $ 4.4 billion in the same quarter of 2019. Net income (operating profit minus non-operating expenses, which interest and taxes) took a deeper dive, down 29 percent to $ 2.5 billion from $ 3.6 billion in the same period last year.

North American sales increased 29 percent to $ 46.1 billion; Operating profit decreased by 43 percent from the previous year. International sales increased by 18 percent, but the segment suffered an operating loss of $ 398 million. Amazon has experienced operating losses in this segment over the past five quarters.

lawsuits

Amazon has received attention from the US government, which accused Amazon of deliberately selling counterfeit goods and being a monopoly. In March and April 2020, several group lawsuits in the US and Canada were filed against Amazon. The complaints allege a pricing arrangement between Amazon and third-party sellers as well as actual and attempted monopolization of an online retail market or submarkets.

hire

With most companies dismissing workers, Amazon was one of the few bright spots when it comes to employment. In March and April, it hired an outstanding 175,000 full-time and part-time workers to keep up with orders. Most of these are stock positions. Amazon provides one of the few alternative sources of income for those who have been laid off from other jobs. This employment can temper some of the negative advertising.

… Amazon was one of the few bright spots when it comes to employment.

Second quarter

In its March 31, 10Q Report to the U.S. The Securities and Exchange Commission stated Amazon:

We expect to continue to be affected by delays in procurement and delivery, interruptions in the supply chain, higher product needs in certain categories, lower product needs in other categories, our ability to collect accounts receivable, and increased execution costs and sales costs as a percentage of net sales through at least Q2 2020 .. .

In the April 30 conference call, CEO Jeff Bezos warned: "If you are a stockholder in Amazon, you may want to take a seat, as we do not think small. Under normal circumstances, we expect that we will earn about $ 4 billion in the coming second quarter. But that's not normal. Instead, we expect to spend the entire $ 4 billion, and maybe a little more, on Covid-related expenses to get products to customers and protect employees. "

Bezos said the company plans to invest in a range of services, including "personal protective equipment, improved cleaning of our facilities, less efficient process paths that better enable effective social distance, higher hourly pay and hundreds of millions to develop our Covid-19 owner-owned test features. "In the United States, most workers receive a pay increase of $ 2 per hour. European workers receive higher pay increases.

These costs could contribute to an operating loss of up to $ 1.5 billion in the second quarter, according to Amazon's guidance.

Despite its promises to protect workers, Amazon gives mixed signals. On May 1, the company ended its policy on unlimited unpaid leave. Warehouse workers throughout the United States and Europe have staged walkouts and claim that the company does not provide adequate worker protection. Amazon, which has an uncompromising anti-union position, has fired some of the leading leaders.

Amazon's dominance

Even before the outbreak of Covid-19, eMarketer predicted that Amazon's US e-commerce sales in 2020 would increase 17.2 percent to $ 261 billion – four percentage points higher than the expected overall growth rate for US e-commerce sales. As a result, eMarketer estimated that Amazon's market share would increase from 37.3 percent in 2019 to 38.7 percent in 2020.

Prior to the pandemic, eMarketer estimated that Amazon's share of US e-commerce would increase from 37.3 percent in 2019 to 38.7 percent in 2020.

Prior to the pandemic, eMarketer estimated that Amazon's share of US e-commerce would increase from 37.3 percent in 2019 to 38.7 percent in 2020.

With the pandemic-related closures of brick-and-mortar stores and the likelihood that some won't open again, Amazon will pick up much of the retail leak. In short, Amazon is well positioned to come out on top in the Covid-19 pandemic, although it suffers from short-term operating losses.



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