Amazon reports record sales in the festive quarter

Few companies have seen growth take off like Amazon during the global health crisis. The explosion of online shopping has jumped the company’s sales to record numbers, as the e-commerce sector grew about 50% over the past year, according to some analysts.

Sales in the December quarter received an additional boost from Amazon’s two-day annual “Prime Day” shopping event – with which the company typically earns billions of dollars – after it was moved from its usual summer schedule to October because of of the pandemic.

Amazon sales in 2020 increased 38% year on year, to $ 386.1 billion, and are expected to advance again this year. Amazon said sales for the current quarter are expected to be between $ 100 billion and $ 106 billion. Wall Street has a sales forecast of about $ 95.8 billion. Amazon shares rose more than 1.6% on the floor.

The online shopping boom has been wide. United Parcel Service Inc. said on Tuesday that sales in the December quarter increased 21%. The package delivery giant said Amazon accounted for 13.3% of its total sales in 2020.

Although the pandemic has turned into a sales boom for Amazon, the Seattle-based company initially struggled to cope with rising demand. The company recovered in part by increasing rapidly. It added more than 500,000 employees, bringing its global workforce to more than 1.3 million employees and increased its service and logistics area by about 50% last year. It also incurred some $ 11.5 billion in Covid-related costs last year, Chief Financial Officer Brian Olsavsky told analysts by phone on Tuesday. Amazon also spent about $ 44 billion to expand, he said, including its transportation network.

The efforts seemed to be worthwhile. “There was a consumer flight to reliability throughout the year, and that was especially true during the holiday seasons, when there were transportation problems,” said Andrew Lipsman, an analyst at research firm eMarketer. “That favored Amazon.”

Another major business from Amazon, the cloud computing services where the company leases server capacity and software tools, also saw strong demand during the pandemic, with companies largely accelerating their digital investments.

While Amazon Web Services was the main driver of the company’s profit, growth in that segment slowed as its scale increased and rivals like Microsoft Corp.

and alphabet Inc.’s

Google pushed to steal market share. AWS generated just over 10% of Amazon’s total sales in the December quarter, but accounted for more than half of the company’s operating revenue. In the period, AWS sales increased 28% over the previous year to $ 12.7 billion. Amazon is the largest cloud provider in the world. Both she and Microsoft’s No. 2 saw growth in cloud services accelerate in recent months as companies accelerated the adoption of digital tools.

AWS chief Andy Jassy is expected to succeed Bezos as CEO of Amazon in the third quarter of 2021, the company said on Tuesday.

Spending plans for this year, Olsavsky said, are still changing, although the company is expected to make more investments, in part to ensure that Amazon’s cloud computing services can keep up with demand. “We definitely don’t want to run out of capacity,” he said.

Amazon has also been building its advertising business, competing with companies like Facebook Inc.

and Google. Amazon said sales in the segment that includes advertising revenue increased 66% over the previous year, to about $ 8 billion.

The company’s results are expected to contribute to a strong profit season for Big Tech, highlighting how the pandemic has increased these companies’ fortunes while devastating other sectors of the economy. Microsoft last week recorded record quarterly sales driven by rising demand for video games and accelerated adoption of its cloud computing services. Apple and Facebook ended their fiscal years with the most profitable quarters of all time.

Amazon’s success came as the company faces regulatory and labor battles. The Federal Trade Commission said on Tuesday that Amazon would pay $ 61.7 million over the previous failure to pay some Amazon Flex drivers the total amount of tips they received from customers. The FTC said that Amazon addressed the issue in 2019 only after learning of a federal investigation into its practices.

Drivers on Amazon’s Flex program use their own vehicles to deliver packages to the e-commerce giant. The FTC said Amazon changed the terms for driver payments without disclosing the adjustment.

“While we disagree that the historical way in which we report payment to drivers is unclear, we added additional clarity in 2019 and we are pleased to leave this matter behind,” said an Amazon spokeswoman.

Congressman Ken Buck (R., Colorado), who criticized other practices in the Amazon, tweeted, “This is a drop in the ocean for Amazon” and added: “We must do more to contain their anti-competitive behavior”.

Employees at one of its warehouses in Alabama are also voting whether to unionize in a move that could reshape the relationship between the company and its workers. And federal regulators in Washington, DC, continued to investigate the retailer’s business practices as part of an extensive investigation into the market powers of large technology companies. In addition, Connecticut is investigating how Amazon sells and distributes digital books, and California is investigating how Amazon treats sellers in its online market.

The company also faces questions about rising costs and other problems with some of its businesses. Physical store revenue, which includes that of Whole Foods Market, declined and fell 8% in the most recent quarter as the pandemic changed purchasing patterns.

Write to Sebastian Herrera at [email protected]

Corrections and amplifications
Amazon.com is refunding the tips for drivers it has withheld from the Federal Trade Commission. An earlier version of this article incorrectly called reimbursement a fine. (Corrected on February 2)