Amazon reports record sales in holiday quarter

Few companies have seen growth accelerate during the global health crisis like Amazon. The explosion of online shopping pushed the company’s revenue to record numbers as the e-commerce sector grew by about 50% last year, some analysts said.

Sales in the December quarter got an extra boost from Amazon’s annual two-day ‘Prime Day’ shopping event – typically making billions of dollars for the company – after it moved from its usual summer schedule to October due to the pandemic.

Amazon sales for the whole of 2020 were up 38% year-on-year to $ 386.1 billion and are expected to grow again this year. Amazon said revenue for the current quarter should be between $ 100 billion and $ 106 billion. Wall Street has forecast sales of about $ 95.8 billion. Shares in Amazon were up more than 1.6% during out of hours trading.

The boom in online shopping is widely supported. United Parcel Service Inc. said Tuesday that sales were up 21% in the December quarter. The parcel delivery giant said Amazon accounted for 13.3% of total revenue in 2020.

Although the pandemic became a sales bonanza for Amazon, the Seattle-based company initially struggled to cope with the rising demand. Partly due to rapid scaling-up, the company recovered. It has added more than 500,000 employees, increasing the global workforce to more than 1.3 million employees and last year increased handling and logistics square footage by approximately 50%. It also posted about $ 11.5 billion in Covid-related costs last year, Chief Financial Officer Brian Olsavsky told analysts on Tuesday. Amazon also spent about $ 44 billion to expand, he said, including on its transportation network.

The efforts seemed to be paying off. “Consumers fled a flight to reliability year-round, and that was especially true during the holiday periods when there were concerns about shipping,” said Andrew Lipsman, an analyst with research firm eMarketer. “That favored Amazon.”

Amazon’s other major company, the cloud computing services in which the company leases server capacity and software tools, also saw strong demand during the pandemic, with companies broadly accelerating their digital investments.

While Amazon Web Services has been the company’s main profit engine, growth in that segment has slowed as scale has expanded and rivals like Microsoft Corp.

and alphabet Inc.’s

Google has 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 income. Over the period, AWS sales increased 28% from the same period last year to $ 12.7 billion. Amazon is the world’s largest cloud provider. Both IT and No. 2 Microsoft have seen the growth of cloud services accelerate in recent months as companies accelerate the adoption of digital tools.

AWS chief Andy Jassy will succeed Mr. Bezos as CEO of Amazon in the third quarter of 2021, the company said Tuesday.

The spending plans for this year, said Mr. Olsavsky, are still on the move, although the company is likely to make further investments, in part to ensure Amazon’s cloud computing services can keep up with demand. “We don’t want to run out of capacity,” he said.

Amazon is also building its advertising business where it competes with companies such as Facebook Inc.

and Google. Amazon said revenue in the segment that includes ad revenue is up 66% from the previous year to about $ 8 billion.

The company’s results are expected to contribute to a strong earnings season for Big Tech, underscoring how the pandemic increased those companies’ fortunes 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 computing services. Apple and Facebook closed their fiscal year with their most profitable quarters ever.

Amazon’s success has come as the company faces regulatory and labor struggles. The Federal Trade Commission said earlier Tuesday that Amazon would pay $ 61.7 million due to Amazon Flex drivers not having paid the full number of tips they received from customers in the past. The FTC said Amazon only addressed the issue in 2019 after learning of a federal investigation into its practices.

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

“While we disagree that the historical manner in which we reported payment to drivers was unclear, we added additional clarity in 2019 and we are pleased to leave this issue behind,” said an Amazon spokeswoman.

Rep. Ken Buck (R., Colo.), Who has criticized other Amazon practices, tweeted, “This is a drop in the bucket for Amazon,” adding, “We need to do more to curb their anti-competitive behavior.”

Employees in one of the Alabama warehouses are also voting on whether or not to unite a union in an action that could reshape the relationship between the company and its employees. And federal regulators in Washington, DC, have continued to investigate retail business practices as part of a wide-ranging investigation into the market power of major technology companies. Additionally, Connecticut is examining how Amazon sells and distributes digital books, and California is examining how Amazon treats sellers in its online marketplace.

The company is also facing questions about rising costs and other issues at some of its businesses. Physical store sales, including Whole Foods Market, fell 8% in the most recent quarter, declining as the pandemic changed shopping patterns.

Write to Sebastian Herrera at [email protected]

Corrections and reinforcements
Amazon.com will refund the driver tips withheld to the Federal Trade Commission. An earlier version of this article incorrectly called the refund a fine. (Corrected on February 2)