Business Maverick

Business Maverick

Amazon Expects the Pandemic-Fueled Shopping Frenzy to Continue

Packages sit on a conveyor belt at an Inc. fulfilment center in Kegworth, U.K., on Monday, Oct. 12, 2020. Photographer: Chris Ratcliffe/Bloomberg Inc., which benefited from a surge in online shopping during the pandemic, expects the trend to continue even as consumers get back to work and resume the vestiges of normal life.

This time a year ago, Amazon Chief Executive Officer Jeff Bezos warned investors that the spread of Covid-19 was going to be costly, in new facilities to meet demand from homebound shoppers and precautions to keep its operations running safely. Amazon hired hundreds of thousands of workers and continued to open warehouses at a rate of one every 24 hours.

Quarterly results released on Thursday show those big bets continue to pay off. The pandemic has supercharged the retailer’s business, enabling the Seattle-based company to more profitably deliver packages, cloud-computing services and streamed movies.

First-quarter revenue jumped 44% to $108.5 billion and earnings were a record $15.79 a share, exceeding analysts’ estimates. For the quarter ending in June, Amazon projected sales between $110 billion and $116 billion, also better than Wall Street expected.

“Fantastic quarter,” said Poonam Goyal, a senior analyst at Bloomberg Intelligence. “Good all around and shows the staying power of changing consumer habits that will lean more toward digital.”

The shares rose about 2.4% in extended trading. The stock has gained about 45% in the last 12 months.

Amazon said Prime Day, the company’s shopping bonanza for members of its $119-a-year speedy shipping program, will take place in the second quarter. That may help the company’s spring results look rosier compared with a period in 2020 when many people were in the midst of lockdowns and shopping almost exclusively online.

Amazon's shares rose in extended trading following its earnings release

The company’s cloud-computing and advertising businesses, which generate fatter margins than the retail operation, are still growing rapidly. Sales at Amazon Web Services climbed 32% to $13.5 billion. The company’s Other segment, which is mostly ads, posted a 77% jump in revenue to $6.9 billion.

Despite the strong results, Amazon prominently devoted long sections of its earnings release to all the good things the company says it’s doing for workers, small businesses and the planet.

Amazon’s recent defeat of a union bent on organizing one of its warehouses amplified the perception that it treats hourly workers unfairly. Climate activists have accused the company of spewing pollution into the neighborhoods its trucks and vans pass through. And regulators and lawmakers are scrutinizing Amazon for what they deem anticompetitive behavior.

This latest blowout quarter will remind the company’s critics of its growing power, said DA Davidson & Co. senior analyst Tom Forte, who called the regulatory risk for Amazon “significant.”


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