Amazon forecasts jump in holiday sales - and pandemic costs

Jeff Bezos, Amazon's chief executive and richest person in the world, said in a press release, "We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season." The question for some analysts has been whether Amazon's consumer division can keep up with still-growing purchases during the pandemic.

Amazon.com Inc on Thursday forecast a jump in holiday sales - and costs related to COVID-19 - as consumers continued to shop more online during the pandemic. Shares initially rose 2% before paring gains and remaining 1% lower in after-hours trading.

Since the start of the virus outbreak in the United States eight months ago, consumers have turned increasingly to Amazon for delivery of groceries, home goods and medical supplies. Brick-and-mortar shops closed their doors; Amazon by contrast moved to recruit over 400,000 workers and earned $6.3 billion in the just-ended quarter, its second consecutive record profit. That has kept the world's largest online retailer at the center of workplace and political tumult. Democratic politicians this month accused Amazon of holding "monopoly power" over merchants on its platform, which the company disputes. Meanwhile, more than 19,000 of Amazon's U.S. employees contracted COVID-19, and some staff protested for site closures.

Amazon's response includes an estimated $4 billion in costs related to COVID-19 this holiday, up from $2.5 billion last quarter. It is testing employees for the virus and has been less productive because of social distancing at its warehouses, which accounts for a big part of its pandemic expense, Chief Financial Officer Brian Olsavsky said on a call with reporters. Amazon forecast operating profit to be between $1.0 billion and $4.5 billion, short of $5.8 billion analysts were looking for, according to research firm FactSet.

At the same time, Amazon's sales are shaping up to hit a record level. Jeff Bezos, Amazon's chief executive and richest person in the world, said in a press release, "We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season."

The question for some analysts has been whether Amazon's consumer division can keep up with still-growing purchases during the pandemic. The company has long worked to avoid a repeat of the 2013 season when delays left some without presents on Christmas Day. Amazon now handles more deliveries in house, and this year it moved its marketing event Prime Day - usually in July - to October, letting customers place holiday orders early.

CFO Olsavsky told reporters that the company is "not totally insulated" from challenges its delivery partners may be facing this quarter, though the online retailer feels ready for the holiday season. "We do think it will be tight on capacity industry-wide, and we’re no exception to that," he said. "It does behoove shoppers to shop early."

Amazon said it expects net sales of $112 billion to $121 billion for the fourth quarter. That would mark the company's first over $100 billion and is ahead of analysts' expectations of $112.3 billion. Amazon Web Services (AWS) has traditionally been a bright spot. The cloud computing division has seen sales rise with demand for gaming and remote work. The unit increased revenue 29% to $11.6 billion, roughly in line with estimates.

 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)