Amazon earnings fell far below expectations when the e-commerce giant reported first-quarter results.
Though some on Wall Street had expected the Seattle-based tech giant to benefit from the increase in online shopping amid the ongoing coronavirus outbreak that has been keeping people at home, Amazon chief executive Jeff Bezos said that the company will spend an expected $US4 billion in operating profit on coronavirus-related expenses in Q2.
Bezos noted in the earnings release that the current coronavirus 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”.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” he 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.
“This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities.
“There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees.
“I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less.”
Earnings per share fell 29 per cent to $5.01 during the quarter, while net sales rose 26 per cent from the prior-year quarter to $75.5 billion. Analysts were expecting $6.25 a share on revenues of $73.61 billion.
Amazon’s stock closed up around 4.3 per cent going into the earnings report, hitting a new high, but fell sharply in after-hours trading.
The company, which has prioritised shipments of essential items such as medical supplies and household staples, is “acting aggressively to help protect customers from bad actors” and has removed over one million offers from its site “due to COVID-based price gouging,” and suspended more than 10,000 selling accounts for violating its fair-pricing policies.