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Despite record sales of 75.5 billion dollars (69 billion euros), Amazon fears a loss of 1.5 billion dollars (1.3 billion euros) in the second quarter due to extra costs to combat covid-19.
“Hardest time ever”
In its first quarter, Amazon increased its sales by 26 %, thanks to the coronavirus pandemic. However, costs rose sharply as well: in addition to prevention and security measures against covid-19, Amazon had to hire 175,000 employees during the outbreak to meet unprecedented demand. As a result, operating profit fell from 4.4 billion dollars to 4.0 billion dollars (3.7 billion euros), just below expectations.
In spite of the growth, CEO Jeff Bezos calls this “the hardest time we’ve ever faced” in a letter to shareholders. To cope with the coronavirus crisis, he plans to invest an additional four billion dollars in corona-related expenses over the next three months. But, and now Bezos asks his shareholders to have a seat, that could lead to losses: Amazon expects an operating loss of 1.5 billion dollars in the second quarter.
“Under normal circumstances, in this coming Q2, we’d expect to make some four billion dollars or more in operating profit. But these aren’t normal conditions”, the company claims. In the same period last year, profits were still 3.1 billion dollars above zero. Sales should grow between 18 % and 28 %.
Angry reactions
Bezos’ pessimism should be taken with a pinch of salt: Amazon is and remains the undisputed winner of the Covid-19 crisis. After a temporary dip in the share price this weekend, analysts immediately increased their appreciation of the company. After all, the extra costs will mainly strengthen its competitive position, reduce risks and result in further growth.
The online giant’s grim attitude is in line with the angry letter Bezos recently received from the US House of Representatives Committee. The CEO is called to testify about the use of external vendor data: research by the Wall Street Journal suggests that Amazon uses sensitive commercial data from individual marketplace vendors to develop competing products.
However, the company previously declared to the House of Representatives that it did no such thing. So not only is Amazon now suspected of exploiting its role as the largest online marketplace in the United States, but also of making false – and potentially criminal – statements.
