Amazon’s second-quarter forecast weighed down by $4 billion in COVID-19 related costs, shares fall


FILE PHOTO: The logo of Amazon is seen at the company logistics center in Lauwin-Planque, northern France, April 22, 2020 after Amazon extended the closure of its French warehouses until April 25 included, following dispute with unions over health protection measures amid the coronavirus disease (COVID-19) outbreak. REUTERS/Pascal Rossignol

(Reuters) – Inc (AMZN.O) on Thursday warned that it could post a loss in the second quarter as it tacked on about $4 billion in costs related to the COVID-19 pandemic, sending its shares down 5% in extended trade.

The e-commerce giant has been spending heavily to keep up with a surge in online orders. The company had earlier said it would hire about 175,000 workers and raise wages by $2 for hourly workers as well as overtime pay, which would increase expenses by nearly $700 million.

“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit. But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe,” Chief Executive Officer Jeff Bezos said in a statement.

Amazon forecast operating income in the range of a loss of $1.5 billion and profit of $1.5 billion for the second quarter. Analysts were expecting operating income of $3.80 billion, according to research firm FactSet.

The company forecast net sales in the range of $75 billion to $81 billion for the second quarter. Analysts were expecting revenue of $77.99 billion, according to IBES data from Refinitiv.

Net sales rose to $75.45 billion from $59.70 billion in the first quarter ended March 31, as the retail giant recorded a surge in demand for online orders of essential goods during the COVID-19 pandemic.

Analysts had expected revenue of $73.61 billion, according to IBES data from Refinitiv.

Reporting by Akanksha Rana in Bengaluru and Jeffrey Dastin in San Francisco; Editing by Vinay Dwivedi

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