Amazon Falls 8% on $4B Coronavirus Costs
Amazon.Com Inc.’s stocks fell almost 8% after announcing that it expects to incur $4 billion in coronavirus-related costs. The largest online retailer expects to incur this amount in the second quarter. This resulted in a potential loss during the same period.
The company’s shares dropped by 7.6% to $2,286.04 in U.S. stock trading on Friday. Its expectation a loss was in the range of $1.5 billion to a profit of $1.5 billion. This was down from the earnings of $3.1 billion it reported in the same period a year ago.
The company expected net sales in the range of $75 billion and $81 billion. It expects growth between 18% and 28% compared with the same quarter a year earlier.
Jeff Bezos, its founder and CEO, said the current crisis is demonstrating the adaptability and durability of Amazon’s business. But it’s also the hardest time they’ve ever faced.
Under normal circumstances, in this coming Q2, they’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances, he added.
Bezos further said that the company expects to spend the $4 billion, or possibly more, on COVID-related costs. It will go towards getting products to customers and keeping employees safe.
They would spend the forecasted second-quarter on personal protective equipment, facilities cleaning, and higher wages for hourly teams. It will also be spent on the development of COVID-19 testing capabilities.
Demand for E-commerce Services Continues to Drive Sales for Amazon
Amazon has procured 100 million face masks and purchased more than 1,000 thermal cameras and 31,000 thermometers. They use them to conduct mandatory daily temperature checks for employees and support staff throughout its operations sites. This includes Whole Foods Market stores.
The online retailer added 175,000 employees in March and April to cope with rising customer demand. The company is looking to hire more workers.
Increased pay for hourly employees and partners during the virus crisis will be nearly $700 million through May 16.
First-quarter results showed that net sales surged by 26% to $75.5 billion compared with the same period last year. This was rising above the analysts’ average estimate of $73.6 billion.
Net income declined to $2.5 billion, or $5.01 per diluted share. This was compared to the $3.6 billion, or $7.09 per diluted share, in the first quarter of 2019.
Wall Street analysts in the stock market maintain a sweet spot for Amazon’s stock. This is amid prospects that strong demand for e-commerce services during the pandemic and beyond will continue to drive sales.
