Amazon.com Inc. (NASDAQ: AMZN) is slated to
report first quarter 2020 earnings results on Thursday, April 30, after the
market closes. Analysts have estimated earnings of $6.25 per share which
compares to EPS of $7.09 reported a year earlier. Sales are expected to grow over
23% to $73.6 billion.
It is no secret that Amazon has seen a huge spike in demand and sales during the coronavirus outbreak as more people stay at home and order online. The company is struggling to deliver large quantities of groceries and household essentials and has put the sale of other non-essential items on hold. It is also seeing a lag in its delivery times due to the massive demand.
A report
from DigitalCommerce360 states that online sales of consumer packaged goods
in the US grew 56% for the one week ending April 18 versus the same period a
year earlier. Food sales during this period was up 69.5%. Experts believe that
the health crisis has brought about a change in grocery purchasing behavior
that is likely to continue even after the pandemic subsides.
This huge pickup in sales is expected to have benefited Amazon
but it remains to be seen how the bottom line has fared since the items being
sold have low margins. It will be worth noting if the sales volume was high
enough to rake up meaningful profits on low margin products. In the fourth
quarter, grocery delivery orders from Amazon Fresh and Whole Foods Market more
than doubled year-over-year.
The company had to hire extra staff to keep up with the
surging demand. After filling 100,000 new positions since March, it has
announced an additional 75,000 jobs. The ecommerce giant has also increased the
pay for its staff amid the outbreak and taken special measures to keep its workplaces
safe. These are likely to result in higher expenses for the quarter which might
also weigh on the bottom line.
Due to the shift towards online purchases, Amazon is likely
to have seen growth in its customer base. It is worth noting if there has been
an increase in Prime memberships as more people stay at home and not only buy
their groceries online but also sign up for new entertainment options such as
Amazon Prime Video.
As more people work from home amid the health crisis, Amazon’s
cloud business is likely to see a pickup in demand for its services. AWS’
customer base already includes some major streaming and social media companies that
have seen a spike in their usage during this time. All in all, Amazon is likely
to come out strong in this tough environment.
In the fourth quarter of 2019, Amazon beat revenue and earnings estimates with a 21% increase in revenue and a 7% growth in EPS. For the first quarter of 2020, the company has guided for sales of $69 billion to $73 billion and operating income of $3 billion to $4.2 billion.
Amazon’s shares have gained 28% since the beginning of the year and 24% in the past one month.