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Amazon warns Covid-19 will wipe out profits

Amazon’s net sales increased by 26% to $75.5bn (£59.1bn) in the first quarter of 2020, but the etailer warned the ongoing coronavirus crisis will wipe out its profits in Q2. 

Excluding the $387m (£303m) unfavourable impact from year-over-year changes in foreign exchange rates throughout the first quarter, net sales increased 27% compared with 2019.

Operating cash flow increased by 16% to $39.7bn (£31.1bn) for the past 12 months, compared with $34.4bn (£26.9bn) in the 12 months ending 31 March 2019.

However, Amazon’s net profit decreased by $1.1bn (£869m) year on year in the first quarter of 2020.

Net profit for the first quarter ending 31 March was $2.5bn (£1.9bn), compared with net income of $3.6bn (£2.8bn) in the first quarter of 2019.

Operating profit was also down to $4bn (£3.1bn), compared with $4.4bn (£3.5bn) in the same period last year.

Net sales for the second quarter are expected to be between $75bn (£58.8bn) and $81bn (£63.5bn), which would be a growth of between 18% and 28% compared with the second quarter of 2019.

Amazon founder and CEO Jeff Bezos said: “From online shopping to AWS to Prime Video and Fire TV, 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.

”The service we provide has never been more critical, and the people doing the frontline work — our employees and all the contractors throughout our supply chain — are counting on us to keep them safe as they do that work. We’re not going to let them down.

”Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention, and money. If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small. Under normal circumstances, in this coming Q2, we’d expect to make some $4bn [£3.1bn] or more in operating profit. 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. This includes investments in personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own Covid-19 testing capabilities.

”There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I’m confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact, they would expect no less.”

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