Amazon's Covid-19 related spending drives down profit

Amazon.com chief executive Jeff Bezos normally uses the company’s earnings report to extol the virtues of Alexa or the benefits of Prime. On Thursday, he told investors to hold on tight as his company navigates “the hardest time we’ve ever faced.”

The largest US online retailer saw profit shrink and said it may incur a loss in the current quarter as it boosts spending to keep logistics operations running smoothly during the coronavirus pandemic.

Alphabet reports better-than-expected first quarter revenue amid slowing ad business

First quarter earnings will be a key test for the stock market rally

“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” Mr Bezos said Thursday in a statement reporting Amazon’s results. “But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4bn, and perhaps a bit more, on Covid-related expenses getting products to customers and keeping employees safe.”

Operating income could range from $1.5bn to a loss of $1.5bn in the quarter ending in June, the Seattle-based company said.

Forecasting a potential loss added a dour note to financial results that showcased the success of a company built to thrive when online shopping is the only option for many shoppers. Unit sales, a closely watched metric, surged 32 per cent in the first quarter. That’s the fastest pace since the fourth quarter of 2012.

The coronavirus pandemic is accelerating long-term trends in favor of Amazon and online shopping, while further weakening brick-and-mortar stores. The company, which has prioritised stocking essential goods, is one of the few large retailers that have continued to operate relatively normally during the crisis.

And, as expected, sales increased 26 per cent to $75.5bn in the quarter that included the outbreak of Covid-19 in the US. Net income was $5.01 per share. Analysts, on average, estimated $73.7bn in revenue and earnings of $6.27 a share, according to data compiled by Bloomberg.

The company, the second-largest private-sector employer in the US after Walmart, has faced criticism from employees, unions, and politicians that it isn’t doing enough to protect workers. Amazon took the rare step in its earnings statement of recapping the safety measures it has enacted during the pandemic -- and its contributions to food banks, students, and health care workers -- before its typical list trumpeting the quarter’s new products and services.

Mr Bezos said the coronavirus effort included spending on personal protective equipment, enhanced cleaning of warehouses and stores, and operational changes to promote social distancing.

“Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention, and money,” he said. “If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small.”

Amazon spokesman Dan Perlet declined to disclose the number of Covid-19 cases in the company’s ranks.

Amazon and other large web retailers have a sense of duty because they’re so ingrained in people’s lives as a result of the pandemic, said Martin Garner of CCS Insight. “They have a clear role in society to help. Amazon has also taken a lot of negative publicity recently, so this massive Covid-19 spend should help address that,’” he said.

Amazon’s big investments, in new data centers to expand its cloud-computing business and warehouses to expand its e-commerce capacity, have historically paid off for investors by leading to increased revenue, but it’s not clear that will be the case with spending in response to the pandemic, said Brian Yarbrough, an analyst at Edward D Jones & Company. Amazon is hiring people, buying Covid-19 tests and cleaning facilities, which can be ongoing costs without providing any long-term gains, he said.

The company had previously said that a hiring binge beginning in mid-March and a temporary $2 an hour hazard pay raise for its hundreds of thousands of warehouse workers would ultimately cost some $700 million. On a conference call with reporters, Chief financial officer Brian Olsavsky said 175,000 additional jobs had been filled to help meet demand and take the place of workers sheltering at home.

Amazon’s fulfillment costs surged 34 per cent to $11.5 billion from the period a year earlier. Shipping costs rose 49 per cent to $10.9 billion.

“They’ve got a choppy history and investors have given them a lot of leeway because they’ve harvested the benefits of those investments later, but this one is a little more tricky,” Mr Yarbrough said. “Some of these costs seem like they’re going to stick around, which brings the profitability of the company into question.”

Sales in Amazon’s physical stores category, which is almost entirely Whole Food Market stores, rose 8 per cent to $4.6bn in the quarter, the largest increase since Amazon bought the organic grocer in 2017. That tally doesn’t include online sales from Whole Foods, which surged in March as people stocked up and overwhelmed Amazon’s food delivery infrastructure. Mr Olsavsky didn’t offer a combined revenue growth rate for Amazon’s grocery business but said the company had expanded grocery delivery capacity by 60 per cent during the quarter.

Amazon Web Services, the cloud computing unit that in recent years has accounted for most of the company’s operating income, posted sales of $10.2bn, up 33 per cent, and just below analysts’ estimates.

Amazon shares declined about 4.5 per cent in extended trading after the results. The stock closed at $2,474 in New York and has jumped more than 33 per cent in 2020.

England's all-time record goalscorers:
Wayne Rooney 53
Bobby Charlton 49
Gary Lineker 48
Jimmy Greaves 44
Michael Owen 40
Tom Finney 30
Nat Lofthouse 30
Alan Shearer 30
Viv Woodward 29
Frank Lampard 29

The finalists

Player of the Century, 2001-2020: Cristiano Ronaldo (Juventus), Lionel Messi (Barcelona), Mohamed Salah (Liverpool), Ronaldinho

Coach of the Century, 2001-2020: Pep Guardiola (Manchester City), Jose Mourinho (Tottenham Hotspur), Zinedine Zidane (Real Madrid), Sir Alex Ferguson

Club of the Century, 2001-2020: Al Ahly (Egypt), Bayern Munich (Germany), Barcelona (Spain), Real Madrid (Spain)

Player of the Year: Cristiano Ronaldo, Lionel Messi, Robert Lewandowski (Bayern Munich)

Club of the Year: Bayern Munich, Liverpool, Real Madrid

Coach of the Year: Gian Piero Gasperini (Atalanta), Hans-Dieter Flick (Bayern Munich), Jurgen Klopp (Liverpool)

Agent of the Century, 2001-2020: Giovanni Branchini, Jorge Mendes, Mino Raiola

France and Covid-19

France orders 250 million masks to ease shortage

Cannes Film Festival postponed due to coronavirus outbreak

France opens housing for infected homeless people

England Test squad

Ben Stokes (captain), Joe Root, James Anderson, Jonny Bairstow, Stuart Broad, Harry Brook, Zak Crawley, Ben Foakes, Jack Leach, Alex Lees, Craig Overton, Ollie Pope, Matthew Potts

The specs

Engine: 1.4-litre 4-cylinder turbo

Power: 180hp at 5,500rpm

Torque: 250Nm at 3,00rpm

Transmission: 5-speed sequential auto

Price: From Dh139,995

On sale: now

FFP EXPLAINED

What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.

What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.

What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.

Getting%20there%20and%20where%20to%20stay

%3Cp%3EFly%20with%20Etihad%20Airways%20from%20Abu%20Dhabi%20to%20New%20York%E2%80%99s%20JFK.%20There's%2011%20flights%20a%20week%20and%20economy%20fares%20start%20at%20around%20Dh5%2C000.%3Cbr%3EStay%20at%20The%20Mark%20Hotel%20on%20the%20city%E2%80%99s%20Upper%20East%20Side.%20Overnight%20stays%20start%20from%20%241395%20per%20night.%3Cbr%3EVisit%20NYC%20Go%2C%20the%20official%20destination%20resource%20for%20New%20York%20City%20for%20all%20the%20latest%20events%2C%20activites%20and%20openings.%3Cbr%3E%3C%2Fp%3E%0A

Key facilities

Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
Premier League-standard football pitch
400m Olympic running track
NBA-spec basketball court with auditorium
600-seat auditorium
Spaces for historical and cultural exploration
An elevated football field that doubles as a helipad
Specialist robotics and science laboratories
AR and VR-enabled learning centres
Disruption Lab and Research Centre for developing entrepreneurial skills

The%20specs

%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%201.8-litre%204-cyl%20turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E190hp%20at%205%2C200rpm%0D%3Cbr%3E%3Cstrong%3ETorque%3A%3C%2Fstrong%3E%20320Nm%20from%201%2C800-5%2C000rpm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESeven-speed%20dual-clutch%20auto%0D%3Cbr%3E%3Cstrong%3EFuel%20consumption%3A%3C%2Fstrong%3E%206.7L%2F100km%0D%3Cbr%3E%3Cstrong%3EPrice%3A%3C%2Fstrong%3E%20From%20Dh111%2C195%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ENow%3C%2Fp%3E%0A

COMPANY%20PROFILE

%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Co%20Chocolat%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Iman%20and%20Luchie%20Suguitan%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%2C%20UAE%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Food%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%241%20million-plus%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Fahad%20bin%20Juma%2C%20self-funding%2C%20family%20and%20friends%3C%2Fp%3E%0A

Director: Laxman Utekar

Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna

Rating: 1/5

MATCH INFO

Southampton 0
Manchester City 1 (Sterling 16')

Man of the match: Kevin de Bruyne (Manchester City)

COMPANY PROFILE

Name: Kumulus Water

Started: 2021

Founders: Iheb Triki and Mohamed Ali Abid

Based: Tunisia

Sector: Water technology

Number of staff: 22

Investment raised: $4 million

Tearful appearance

Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.

Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.

She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.

A spokesman said her upset demeanour was due to a personal matter.

How our nine-month-old has made the Canadian winter a little bit warmer for us

Canadians rallying around a targeted Syrian restaurant is telling about attitudes to migrants

Don Cherry and the real issue with being one of 'you people'

COMPANY%20PROFILE

%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3ESmartCrowd%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3ESiddiq%20Farid%20and%20Musfique%20Ahmed%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%20%2F%20PropTech%0D%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3E%24650%2C000%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%3C%2Fstrong%3E%2035%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESeries%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EVarious%20institutional%20investors%20and%20notable%20angel%20investors%20(500%20MENA%2C%20Shurooq%2C%20Mada%2C%20Seedstar%2C%20Tricap)%3C%2Fp%3E%0A

Sole survivors

Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.

Benefits of first-time home buyers' scheme

Priority access to new homes from participating developers
Discounts on sales price of off-plan units
Flexible payment plans from developers
Mortgages with better interest rates, faster approval times and reduced fees
DLD registration fee can be paid through banks or credit cards at zero interest rates