Since the start of the coronavirus outbreak, shoppers have
relied increasingly on Amazon for delivery of home staples, and the company
sees this trend continuing post-pandemic, particularly for groceries.
While brick-and-mortar stores closed, Amazon has now posted
four consecutive record quarterly profits, attracted more than 200 million
Prime loyalty subscribers, and recruited over 500,000 employees to keep up with
surging demand.
Amazon said it expects operating income for the current
quarter to be between $4.5 billion and $8 billion, which includes about $1.5
billion in costs related to COVID-19.
Shares rose 4% in after-hours trade.
Throughout the pandemic, the world's largest online retailer
has been at the center of workplace tumult, with a failed attempt by organized
labor to unionize an Amazon warehouse in Alabama and litigation in New York
over whether it put profit ahead of employee safety.
Amazon's business has largely been unfazed by the
developments. Michael Pachter, an analyst at Wedbush Securities, said a jump in
Prime subscriptions, consumers' embrace of grocery delivery amid COVID-19 and
an improving economy worked to Amazon's advantage.
"Habit. Good quality grocery. Stimulus checks,"
Pachter said. "They're going to thrive."
Slower sales growth in the current period relative to the
last quarter reflected a tougher comparison to last year, when lockdowns were
in full swing, Pachter said.
CEO Jeff Bezos touted the results of the company's cloud
computing unit Amazon Web Services (AWS) in a press release, saying, "In
just 15 years, AWS has become a $54 billion annual sales run rate business
competing against the world's largest technology companies, and its growth is
accelerating."
The plaudits were a nod to Andy Jassy, AWS's long-time cloud
chief who will succeed Bezos as Amazon's CEO this summer. Amazon announced a
deal for Dish Network Corp to build its 5G network on AWS last week, and the
division increased revenue 32% to $13.5 billion, ahead of analysts' average
estimate of $13.2 billion, according to IBES data from Refinitiv.
Brian Olsavsky, Amazon's chief financial officer, said
businesses increasingly wanted to outsource their technology infrastructure to
AWS.
"We expect this trend to continue as we move into the
post-pandemic recovery," he said.
Adding to Amazon's second-quarter revenue will be Prime Day,
the company's annual marketing blitz. Amazon disclosed the event will take
place in June rather than July, as is more typical, to reach customers before
they head on vacation.
Grocery sales anchored by Amazon's subsidiary Whole Foods
Market remain a bright spot, too. Olsavsky called grocery "a great
revelation during the post-pandemic period."
The company's first-quarter profit more than tripled to $8.1
billion from a year ago, on sales of $108.5 billion, ahead of analysts'
estimates.
AD SALES GROWTH
Amazon saw its stock price nearly double in the first part
of 2020 as it benefited from the pandemic. This year, however, it has
underperformed the S&P 500 market index. Its shares were up about 8.5% year
to date versus the index's 13% gain.
Spending on COVID-19 and logistics has chipped away at
Amazon's bottom line. The company has poured money into buying cargo planes and
securing new warehouses, aiming to place items closer to customers to speed up
delivery. It said Wednesday it planned to hike pay for over half a million
employees, costing more than $1 billion - and it is still hiring for tens of
thousands more positions.
Olsavsky said Amazon was still working to restore one-day
package delivery rates to pre-pandemic levels.
He told reporters the company intends to increase spending
on video content this year as well. Consumers have been watching content for
more hours on Amazon, Olsavsky said.
While far behind ad sales leaders Facebook Inc and Alphabet
Inc's Google, Amazon is growing its ad business because brands' placements
often result directly in sales, reaching customers who are on Amazon with an
intention to shop.
Jesse Cohen, senior analyst at Investing.com, said,
"Outside of its core retail and cloud units, advertising revenue is
increasingly becoming another substantial growth driver for Amazon."
Amazon said ad and other sales rose 77% to $6.9 billion,
ahead of analysts' estimate of $6.2 billion.
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