The lockdown forced by the coronavirus continues to be a driving force for Amazon, which saw its profit triple from a year ago. Those profits are expected to continue even as the company spends billions of dollars dealing with COVID-19.
Net income for the third quarter rose to $6.3 billion, or $12.37 a share, from $2.1 billion, or $4.23 a share, a year ago, despite spending around $2.5 billion dealing with the global pandemic. The online retailing giant also posted revenue that rose 37% to $96.1 billion. Excluding foreign exchange rate changes, the increase was still 36% over a year ago.
Wall Street expected Amazon would maintain its strong momentum in the third quarter, with the e-commerce juggernaut making billions more dollars during the pandemic as customers used its site to avoid going to stores. Amazon wasn't the only online retailer benefiting from this trend, with Etsy, Walmart, Target and Wayfair all seeing big sales increases too. While the latest quarter didn't include Prime Day -- which was delayed to the fourth quarter and ran from Oct. 13 to 14 -- Amazon was still predicted to post a 32% rise in revenue thanks to a surge in demand all year.
Amazon is now poised to exit the pandemic -- whenever that may be -- as a bigger and more powerful entity in retail, especially as dozens of traditional merchants like Lord & Taylor and Aldo have gone into bankruptcy protection this year. This dynamic will benefit Amazon's revenue growth, but it creates other problems. Millions of consumers, now habituated to using Amazon, may find fewer shopping options, making it easier for Amazon to raise prices if it decides to do so.
For the fourth quarter, Amazon said it expects sales to range between $112 billion and $121 billion, or growth of 28% to 38% vs. a year ago. Analysts expected the company to post $112.3 billion in revenue in the period, according to Yahoo Finance.
Amazon shares fell 2.1% to $3,145 in after-hours trading.
For Amazon, getting bigger may invite even more scrutiny, with elected officials and regulatory agencies in the US already investigating the potential monopoly powers of Big Tech. Last week, the Justice Department sued Google, claiming the company operates a search monopoly. More of these actions against Amazon, Apple and Facebook are widely expected.
That's why Amazon's been on a kick to talk about all the good it's doing for small and medium-sized businesses, as well as its own employees. On Thursday, CEO Jeff Bezos called for other employers to raise the minimum wage to $15 an hour.
"Two years ago, we increased Amazon's minimum wage to $15 for all full-time, part-time, temporary, and seasonal employees across the U.S. and challenged other large employers to do the same," Bezos said in the company's release. "Best Buy and Target have stepped up, and we hope other large employers will also make the jump to $15. Now would be a great time."
Amazon started off the pandemic with difficulty, as the company experienced regular delays in its heralded logistics network that frustrated its customers. It also struggled to implement new safety features in its warehouses, as workers repeatedly protested for better protections from the coronavirus. The company spent huge sums of money to tackle these problems, hiring hundreds of thousands of new workers to handle the spike in consumer demand and adding dozens of new safety measures including a testing regime, masks and more rigorous cleanings.
Delays are no longer the norm for Amazon orders but the company disclosed this month that nearly 20,000 US workers contracted COVID-19, a sign that Amazon's work to contain the virus in its workforce is far from over.
Bezos warned in April that Amazon would spend $4 billion for its coronavirus response in the second quarter, potentially wiping out the company's profits for that period. Instead, Amazon posted an all-time record profit.
The fourth quarter should show even more strength for the company, with Prime Day adding to Amazon's typical growth from Black Friday and Cyber Monday. Amazon this month said independent sellers on its platform posted a nearly 60% increase in sales during Prime Day.
Since those sellers account for about 60% of Amazon's sales, the company likely saw a big increase in this latest Prime Day, putting the company in a good starting point for the holiday season. Edison Trends said Prime Day likely grew by 36% in the US.
Amazon said it expects operating income in the period to be between $1 billion and $4.5 billion, compared with $3.9 billion a year ago. The projection includes $4 billion in costs related to coronavirus.