Online grocery sales that tripled year over year powered Amazon.com Inc. to a 43.4% increase in second quarter sales in North America and 33.5% growth worldwide.
As more consumers bought groceries online in response to the coronavirus pandemic, Amazon said it increased grocery delivery capacity by 160%, including by increasing headcount in its fulfillment network by 34%. Amazon has hired 175,000 employees since the COVID-19 outbreak caused a spike in sales. The leading online retailer also tripled the number of Whole Foods Market stores where consumers can pick up groceries.
“This was another highly unusual quarter, and I couldn’t be more proud of and grateful to our employees around the globe,” said CEO Jeff Bezos in a prepared statement that accompanied today’s earnings release. “As expected, we spent over $4 billion on incremental COVID-19-related costs in the quarter to help keep employees safe and deliver products to customers in this time of high demand—purchasing personal protective equipment, increasing cleaning of our facilities, following new safety process paths, adding new backup family care benefits, and paying a special thank you bonus of over $500 million to front-line employees and delivery partners. We’ve created over 175,000 new jobs since March and are in the process of bringing 125,000 of these employees into regular, full-time positions.”
Bezos added that sales by outside merchants on Amazon’s 16 marketplaces worldwide grew faster than Amazon’s sales of merchandise it owns, but he didn’t provide details.
Despite the coronavirus-related expenses, Amazon’s net income doubled to $5.24 billion in the quarter from $2.63 billion in the second quarter of 2019. On a conference call with analysts, Amazon chief financial officer Brian Olsavsky said Amazon cut back on marketing expenses to curtail surging demand and also spent less on travel and meetings, contributing to higher profits. Higher sales that made full use of Amazon’s investments in fulfillment also boosted net income.
Also contributing to the brighter profit picture was Amazon’s international segment contributing $345 million in operating income in Q2 after losing $601 million in the same quarter last year. Olsavsky said higher sales contributed to the improved profitability, and noted particularly strong growth in the United Kingdom as stay-at-home orders led to sharply increased sales.
Olsavsky said more investments were coming. He said Amazon would increase the square footage of warehouses in its fulfillment network by 50% this year, compared to 15% last year. That includes growth in its large fulfillment centers that pick and pack orders and in smaller sorting centers and delivery stations that organize them for efficient delivery.
He added that Amazon would incur another $2 billion in expenses in the third quarter related to the coronavirus. That includes enforcing social distancing in its warehouses, which can require more workers to handle orders, purchases of protective gear and more extensive cleaning of locations than normal.
He said demand remained “super high,” driven largely by members of Amazon Prime buying more frequently and spending more each time they buy.
Amazon’s market-leading cloud computing unit Amazon Web Services accounted for 57.5% of operating income during the second quarter, a reduction from 68.8% in the year-ago quarter, despite AWS increasing its net income by 58.3% in the current quarter. Amazon’s international retail operations swung to an operating profit in the current quarter from a loss last year, reducing the share of operating income attributed to AWS.
For the third quarter, Amazon projects revenue of between $87.0 and $93.0 billion, which would represent an increase of between 24% and 33% year over year. The company projects operating income of $2.0 to $5.0 billion, compared with $3.2 billion last year.
For the second quarter ended June 30, Amazon reported:
- North America sales of $55.44 billion, an increase of 43.4% from $38.65 billion in the second quarter of 2019.
- International sales of $22.67 billion, a 38.5% increase from $16.37 billion a year ago.
- Amazon Web Services revenue of $10.81 billion, up 29.0% from $8.38 billion.
- Consolidated revenue of $88.91 billion, an increase of 40.2% from $63.40 billion a year ago.
- Net income of $5.24 billion, up 99.7% from $2.63 billion a year earlier.
For the first 6 months of 2020, Amazon reported:
- North American sales of $101.56 billion, an increase of 36.4% from $74.47 billion in the same period a year ago.
- International sales of $41.77 billion, up 28.3% from $32.56 billion.
- AWS sales of $21.03 billion, a 30.8% increase from $16.08 billion.
- Consolidated revenue of $164.36 billion, up 33.5% from $123.10 billion.
- Net income of $7.78 billion, an increase of 25.7% from $6.19 billion in the same period a year ago.
Amazon is No. 1 in the 2020 Digital Commerce 360 Top 500.
Percentage changes may not align exactly with dollar figures due to rounding.