Amazon says expenses related to Covid-19 will wipe out current earnings

Activists painting a message for Amazon founder and CEO Jeff Bezos on the street outside one of his residences in Washington last month. PHOTO: REUTERS
Activists painting a message for Amazon founder and CEO Jeff Bezos on the street outside one of his residences in Washington last month. PHOTO: REUTERS

SAN FRANCISCO • Amazon said its profits took a hit in the past quarter due to the coronavirus pandemic and that its earnings in the current period would be entirely wiped out by virus-related expenses.

The technology and e-commerce giant said on Thursday that its revenues surged 26 per cent in the first three months of 2020 to more than US$75 billion (S$106 billion), as people hunkered down at home due to the pandemic turned to it for supplies and entertainment.

But profits slipped 29 per cent from a year ago to US$2.5 billion.

Chief executive Jeff Bezos said all profits in the April-June quarter would be erased by expenses linked to the global virus outbreak.

"In this coming Q2, we'd expect to make some US$4 billion or more in operating profit," Mr Bezos said. "But these aren't normal circumstances. Instead, we expect to spend the entirety of that US$4 billion, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe."

Shares in the Seattle-based company slipped some 4.2 per cent in after-hours trading that followed release of the earnings report.

Mr Bezos said "the current 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".

"Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention and money."

Amazon has become a lifeline for consumers facing lockdowns and restrictions around the world, and the company is in the process of adding some 175,000 new employees to cope with surging demand.

But the company has also faced protests from warehouse workers and others who claim the employer has failed to do enough to keep them safe.

Amazon has been scrambling to keep up with demand for supplies and groceries, including from its Whole Foods grocery chain, amid strains in getting and delivering goods.

The e-commerce leader has been prioritising "essential items" such as household staples and medical supplies, while working to stem price-gouging from third-party sellers.

AGENCE FRANCE-PRESEE

A version of this article appeared in the print edition of The Straits Times on May 02, 2020, with the headline 'Amazon says expenses related to Covid-19 will wipe out current earnings'. Print Edition | Subscribe