Amazon's Q1 profit trebles as consumers keep clicking

NEW YORK • Amazon.com, one of the biggest winners of the Covid-19 pandemic, posted record profits on Thursday and signalled that consumers would keep spending in a growing US economy and converts to online shopping are not likely to leave.

Since the start of the coronavirus outbreak, shoppers have relied increasingly on Amazon for delivery of home staples, and the company sees this continuing post-pandemic, particularly for groceries.

While brick-and-mortar stores closed, Amazon has now posted four consecutive quarters of record profits, attracted more than 200 million Prime loyalty subscribers, and recruited over 500,000 employees to keep up with surging demand.

Amazon said it expects operating income for the current quarter to be between US$4.5 billion and US$8 billion (S$10.6 billion), which includes about US$1.5 billion in costs related to Covid-19. Shares rose 4 per cent in after-hours trade on Thursday.

Throughout the pandemic, the world's largest online retailer has been at the centre of workplace tumult, with a failed attempt by organised labour to unionise an Amazon warehouse in Alabama and litigation in New York over whether the company put profit ahead of employee safety.

Amazon's business has largely been unfazed by the developments. Mr Michael Pachter, an analyst at Wedbush Securities, said a jump in Prime subscriptions, consumers' embrace of grocery delivery amid Covid-19, and an improving economy worked to Amazon's advantage.

Slower sales growth in the current period relative to the last quarter reflected a tougher comparison with last year, when lockdowns were in full swing, Mr Pachter said.

Amazon chief executive officer Jeff Bezos touted the results of the company's cloud computing unit Amazon Web Services (AWS) in a press release, saying: "In just 15 years, AWS has become a US$54 billion annual sales run rate business competing against the world's largest technology companies, and its growth is accelerating."

The company's first-quarter profit more than trebled to US$8.1 billion from a year ago, on sales of US$108.5 billion, ahead of analysts' estimates.

Amazon saw its stock price nearly double in the first part of last year as it benefited from the pandemic. This year, however, it has underperformed the S&P 500 market index. Its shares were up about 8.5 per cent year to date versus the index's 13 per cent gain.

Spending on Covid-19 and logistics has chipped away at Amazon's bottom line. The company has poured money into buying cargo planes and securing new warehouses, aiming to place items closer to customers to speed up delivery. It said on Wednesday that it planned to hike pay for over half a million employees, a move costing more than US$1 billion - and it is still hiring for tens of thousands more positions.

REUTERS