Amazon announces record sales in holiday quarter

Few companies have seen their growth take off like Amazon during the global health crisis. The explosion in online shopping has taken the company’s sales to record highs, with the e-commerce sector growing by around 50% throughout the past year, some analysts have said.

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

Amazon’s sales for all of 2020 increased 38% year-over-year to $ 386.1 billion and are expected to grow further this year. Amazon said sales for the current quarter are expected to be between $ 100 billion and $ 106 billion. Wall Street has forecast sales of around $ 95.8 billion. Amazon shares rose more than 1.6% after business hours.

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

Although the pandemic turned into a sales boon for Amazon, the Seattle-based company initially struggled to deal with the growing demand. The company has partially recovered by expanding rapidly. It added more than 500,000 employees, bringing its global workforce to more than 1.3 million employees, and increased its distribution and logistics square footage by approximately 50% last year. It also incurred around $ 11.5 billion in Covid-related costs last year, CFO Brian Olsavsky told analysts on Tuesday. Amazon has also spent around $ 44 billion to grow, he said, including on its transportation network.

The efforts appeared to be paying off. “There has been a flight to reliability from consumers throughout the year, and this was especially true during holiday periods when there were shipping issues,” said Andrew Lipsman, analyst. at the research firm eMarketer. “It benefited Amazon.”

Amazon’s other major business, cloud computing services in which the company rents server capacity and software tools, also saw strong demand during the pandemic, as companies largely ramped up their digital investments.

While Amazon Web Services has been the main profit driver for the company, the growth of this segment has slowed as its scale increased and competitors such as Microsoft Corp.

and alphabet Inc. of

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 profit. During the period, AWS sales increased 28% from the prior year period to $ 12.7 billion. Amazon is the world’s largest cloud provider. The company and No. 2 Microsoft have seen the growth of cloud services accelerate in recent months as businesses accelerate the adoption of digital tools.

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

Spending plans for this year, Mr. Olsavsky said, are still evolving, although the company is likely to make further investments, in part to ensure that Amazon’s cloud services can keep pace with the market. request. “We certainly don’t want to run out of capacity,” he said.

Amazon has also grown its advertising business where it competes with companies such as Facebook. Inc.

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

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

Amazon’s success has come as the company grapples with regulatory and labor battles. The Federal Trade Commission said earlier Tuesday that Amazon would pay $ 61.7 million for its past failure to pay certain Amazon Flex drivers the full amount of tips received from its customers. The FTC said Amazon only addressed the issue in 2019 after learning of a federal investigation into its practices.

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

“While we disagree that it was unclear how we reported driver pay, we added additional detail in 2019 and are happy to put this issue behind us,” a an Amazon spokesperson said.

Representative Ken Buck (R., Colorado), who has criticized other Amazon practices, tweeted, “It’s a drop in the bucket for Amazon” and added, “We need to do more to curb their anti-competitive behavior.”

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

The company is also facing questions about rising costs and other issues with some of its operations. Revenues from brick-and-mortar stores, which include Whole Foods Market, fell and fell 8% in the last quarter as the pandemic changed shopping habits.

Write to Sebastian Herrera at [email protected]

Corrections and amplifications
Amazon.com reimburses driver tips it withheld from the Federal Trade Commission. An earlier version of this article incorrectly called reimbursement a fine. (Corrected February 2)