Amazon operating profit is expected to reach $4 billion in the next three months of the year, according to the retailer's announcement.
They predict Amazon operating profit to be between $1 billion and $4.5 billion in the last quarter of the year. That covers about $4 billion of costs associated with Covid-19, such as testing, cleaning, extending employee breaks, and social distancing policies.
That $3.5 billion difference gives investors space to consider other factors. Last year, Amazon made a $1.7 billion gap into its fourth-quarter operating profit prediction. In 2018, the difference reached $1.5 billion.
On a call with analysts, Chief Financial Officer Brian Olsavsky said that the final quarter always carries uncertainties due to the holidays and volatile weather patterns. This is considered the biggest period of the year for the company by revenue. Analysts also expect this year to be Amazon’s first-quarter ever to exceed $100 billion in sales.
“There’s a whole host of conditions that generally come to bear in Q4,” Olsavsky said. “I think the fact that Covid is dwarfing all of those is causing a lot of uncertainty.”
Amazon shares dropped almost 2% in extended trading even though the company surpassed predictions for its revenue and profit. Amazon noted that sales in the fourth quarter will be between $112 billion and $121 billion, compared to analysts’ average projection of $112.3 billion, according to FactSet. Analysts foresee Amazon operating profit to be $5.8 billion.
“Once the pandemic is over and hopefully that’s soon, these should be costs that don’t recur,” Olsavsky said.
Amazon's accomplishments
Amazon recently held its biggest Prime Day ever but it chose to focus on how small businesses benefited from the annual event.
The change in approach may be attributed to lawmakers criticizing the retailer for its power over independent merchants selling products through its website and other tactics that critics claim to be hampering competition.
While the firm confirmed that this year’s Prime Day was the best on record since the annual event started in 2015, it decided not to include it in the official announcement. According to analysts, Amazon would make as much as $10 billion in sales from this event but the company declined to offer sales figures.
This was a deviation from the company’s previous way of announcing Prime Day results. In the past, Amazon’s messaging strategy was focused on breaking sales records.
Andrew Lipsman, an analyst at market research firm eMarketer who has studied Amazon for more than 10 years, pointed out that the change in messaging strategy may mean that the retail giant was trying to position itself as an ally of small businesses as antitrust issues emerged.
Lipsman said: “Every one of the big tech platforms is trying to position itself as friends of the little guy during the pandemic.”
In September, Amazon announced that it is hiring 10,000 new permanent employees this year, most of which will be based in Amazon warehouses.
According to Amazon, it had already recruited 3,000 new permanent staff for its warehouses, delivery stations, and sorting centers this year. The company will welcome additional 7,000 roles by the end of 2020 across more than 50 UK sites, including corporate offices and two new warehouses that will run in the coming months in the North East and in the Midlands.
Meanwhile, the Amazon jobs that will be filled include health and safety specialists, engineers, as well as workers who pick, pack, and ship items to Amazon’s customers.
The e-commerce giant said most of the people that it hired for temporary roles during the pandemic will be able to land in permanent roles.
In a statement, Stefano Perego, Amazon’s vice president of European customer fulfillment, said that “The new roles will help us continue to meet customer demand and support small and medium sized businesses selling on Amazon.”
He noted: “We are employing thousands of talented individuals in a diverse range of good jobs from operations managers and tech professionals through to people to handle customer orders.”
