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Amazon Forecast Possible Loss In Current Quarter Due To $4 Billion Expenses Related To Coronavirus


05/03/2020


Amazon Forecast Possible Loss In Current Quarter Due To $4 Billion Expenses Related To Coronavirus
Despite a surge in revenues, Amazon.com Inc could post a quarterly loss for the latest completed quarter which would be the first in five years, the largest e-commerce company of the world said. The company explained the loss because of expenditure of at least $4 billion by it for measures against the novel coronavirus pandemic which included its efforts to conduct Covid-19 tests for its employees. 
 
The announcement resulted in a 5 per cent drop in the share price Amazon.
 
“We’re not thinking small,” said Jeff Bezos, the company’s founder and richest person in the world, which indicated that the company would make large investments during the pandemic. In comparison to the brick-and-mortar rival retailers which have had to close down stores because of the pandemic, business for Amazon has increased prompting the company to hire 175,000 people.
 
Amazon predicted a 28 per cent increase in revenues to $81 billion during the current quarter when the government imposed lockdown is in full swing.
 
The company said that it would have made an operating profit of at least $4 billion in the current second quarter under normal circumstances but it will have to spend an equal amount of money or even more to respond to the coronavirus pandemic during the quarter which could result in a loss. According to the forecast of the company, its operating income will range from a loss of $1.5 billion to a profit of $1.5 billion compared to earnings of $3.1 billion in the same period a year ago.
 
Investors and shareholders of the company have been unsettled in the past because of huge expenditure on cloud data centers, streaming video and voice-controlled gadgets which have helped the company to create new revenues streams after maturity.
 
Despite the forecast, shares of Amazon increased by 10 per cent even as the broader market shed value.
 
The boost in shares of Amazon has resulted in growth of personal wealth of Bezos by about $5 billion.
 
Kim Khan, US markets analyst at Investing.com said that the novel coronavirus threat is now prompting the company to increase investments in a similar manner.
 
“Amazon built its commanding position by spending all its cash to grow before it became the profit-making machine it is today. It’s doing the same thing during this lockdown period and will likely come out a winner again,” Khan said.
 
However, fresh labor risks are being faced by Amazon. There have been small protests at many office and warehouse locations of the company against infection of many of its workers at dozens of locations, with demands for closure of such offices. All of its warehouses in the US and Europe have been installed with measures to check temperature of employees while the company has also distributed masks for the workers. The company has also installed software to monitor for social distancing in addition to implementing other measures to make sure that its sites continued to function.
 
There was a 26 per cent growth in the revenues of the company for the first quarter at $75.5 billion which beat estimates of analysts, according to IBES data from Refinitiv, which averaged at $73.6 billion.
 
(Source:www.economictimes.com)