Amazon predicted on Thursday that as consumers continue to shop online during the pandemic, holiday sales and COVID-19-related costs will rise.

A company executive added that the increasing spending on delivery infrastructure may continue for several years, and the stock price has fallen 2% in after-hours trading.

Since the outbreak of the virus in the United States eight months ago, consumers have increasingly turned to Amazon to buy groceries, household goods and medical supplies. The physical store is closed. In contrast, Amazon recruited more than 4,00,000 workers in the quarter just ended and earned 6.3 billion US dollars (approximately 467 billion rupees), the second consecutive record profit.

This keeps the world’s largest online retailer at the center of the workplace and political turmoil. This month, Democratic politicians accused Amazon of holding a “monopoly” over merchants on its platform, which the company questioned. At the same time, more than 19,000 American employees of Amazon signed contracts with COVID-19, and some employees protested the site closure.

Amazon’s response now includes an estimated $4 billion (approximately Rs 29,825 crore) in expenses related to COVID-19 this holiday season, up from $2.5 billion (approximately Rs 18.640 crore) in the previous quarter. It is testing employees for viruses and providing new employees with protective equipment. Chief Financial Officer Brian Olsavsky said in a phone call with reporters that due to the long social distance in the warehouse, the company’s work efficiency is also low, which is a huge cost to the pandemic. Part.

According to data from research firm FactSet, Amazon predicts that analysts’ average expected operating profit is between US$1 billion (about 74 billion rupees) and US$4.5 billion (about 33.5 billion rupees), while analysts have been looking for US$5.8 billion (Approximately Rs 43.2 billion).

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The competition this holiday season for the company’s retail and cloud computing is still fierce. The traditional highlight of the cloud computing sector is that Amazon Web Services (AWS) competes with smaller rival Microsoft for a business with great potential from remote work to cloud-based gaming during the pandemic.

In the third quarter that just ended, AWS sales increased by 29%, while Microsoft reported that its Azure cloud revenue increased by 48%.

“Capacity tightening”

Nevertheless, Amazon’s sales are gradually reaching record levels. Amazon CEO and the world’s richest man Jeff Bezos said in a press release: “We see more customers shopping for holiday gifts than ever before. This is just a sign that this will It’s an unprecedented holiday.”

The company reported that customers in its loyalty club Prime shop more frequently, renew their memberships at higher rates, and internationally, they seek more video entertainment services from Amazon. Merchants also increased their budgets for advertising on Amazon in the third quarter, which was reduced during the spring peak of the pandemic.

The question for some analysts is whether Amazon’s consumer department can keep up with the growing purchases during the pandemic.

The company has long worked hard to avoid repeating the mistakes of the 2013 season because the delays during the Christmas period left some people without gifts. Amazon can now handle more internal deliveries. This year, it moved its marketing campaign “Prime Day” (usually in July) to October, allowing customers to place holiday orders earlier.

Chief Financial Officer Olsavsky told reporters that although online retailers are ready for the holidays, the company has not “completely shaken off” the challenges that its delivery partners may face this quarter.

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He said: “We do believe that the capacity of the entire industry will shrink, and we are no exception.” “This does enable shoppers to shop early.”

Olsavsky said in a conference call with analysts that Amazon’s contract fulfillment and logistics area will increase by 50% this year. He said that the company has invested a lot of money in expanding its transportation capacity, which is part of the capital expenditures and leases of approximately US$30 billion (approximately Rs 2,237 billion) throughout the third quarter. He said that increased transportation investment may continue in the next few years.

Amazon said that for the fourth quarter, its net sales are expected to reach US$112 billion (approximately Rs 8,35,300 crore) to US$121 billion (approximately Rs 9,02,400 crore). This will mark the company’s first time to exceed $100 billion (approximately Rs 748 billion), and the company’s third-quarter revenue exceeded eMarketer’s Andrew Lipsman (Andrew Lipsman) and other analysts expected.

Lipsman said: “Although it is clear that the shift to e-commerce driven by the pandemic will increase Amazon’s revenue, it can easily exceed the already high threshold, which is surprising.”

© Thomson Reuters 2020

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