Earnings

Amazon Crushes Earnings As Online Grocery Sales And Prime Viewership Soar

To say that Amazon posted a good quarter on Thursday (July 30) is a bit like saying Michael Jordan had a good career.

By any metrics, the company’s earnings were off the charts, and they hardly came as a result of cost-cutting. The company almost doubled its revenue and profit numbers while spending more than $9 billion on capital improvement projects.

Among those numbers: Operating cash flow increased 42 percent to $51.2 billion compared with $36.0 billion for Q2 2019. Net sales increased 40 percent to $88.9 billion compared with $63.4 billion in second-quarter 2019.

Operating income increased to $5.8 billion in the second quarter compared with $3.1 billion a year ago, and net income increased to $5.2 billion compared to $2.6 billion. Video hours on Amazon Prime doubled. Online grocery sales tripled.

Amazon also said it has created more than 175,000 new jobs since March and will bring 125,000 of those people into full-time positions. The company now has over 1 million regular and seasonal employees.

The company added that it spent over $4 billion on incremental COVID-19-related costs on employee safety, employee bonuses and delivery costs. Other capital expenditures went to fulfillment, transportation and investments in Amazon Web Services. In fact, the company’s list of achievements for AWS filled two pages of its earnings press release.

On the earnings call, Chief Financial Officer Brian Olsavsky pointed out that Q2 2020’s numbers topped Q4 2019 and that Q3 would be even bigger.

“As a reminder, Q4 is typically our largest volume quarter for the retail business. That’s not the case this year,” he said. “What that means is that we can flex into space normally used for second half peak demand. Despite the strong operating leverage in Q2, as we move toward peak in the second half of the year, we will ramp up our space needs even further, and we’ll be adding significant fulfillment center and transportation capacity.”

In other words: Amazon says it can do even better.

Part of the reason it crushed Q2, in addition to the overall digital shift caused by the pandemic, was Prime customers. Olsavsky didn’t detail any of the Prime member spending or even intimate how many new customers joined via Prime. But he said the company continued to see high Prime member engagement throughout the quarter with Prime members shopping more frequently with larger basket sizes.

The Q3 guidance given by the company called for a 30 percent to 40 percent increase over 2019. It’s proof that the company believes the digital shift will last, but Olsavsky played coy.

“I think it’s hard to tell, but we’re super encouraged by the fact that grocery delivery picked up and that it’s accelerated versus what we ... thought,” he said. “And we certainly are glad to be there for our Prime members who are shopping more frequently and buying more. We do know that there are other options, but they’re limited. Hopefully, things like masks and gloves and cleaning supplies are just one-time purchases, but we’ll see.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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