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Feb 2, 2021

Amazon projects revenue signaling strong e-commerce demand

'I would construe this as a positive': Dan Morgan on Jeff Bezos transition from CEO to executive chairman

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Amazon.com Inc. forecast first-quarter sales that topped analysts’ estimates, signaling the internet shopping boom will continue after fueling the company’s first US$100 billion quarter during the holidays.

The company’s forecast and quarterly results were overshadowed by the announcement that Chief Executive Officer Jeff Bezos will step down from the role to become executive chairman in the third quarter and be succeeded by Andy Jassy, now head of Amazon Web Services, the company’s cloud computing unit.

Revenue will be US$100 billion to US$106 billion in the quarter ending in March, the Seattle-based company said Tuesday in a statement. Amazon projected operating income of US$3 billion to US$6.5 billion. Analysts, on average, estimated profit of US$6.07 billion on sales of US$95.72 billion, according to data compiled by Bloomberg.

The online retailer reported fourth-quarter sales jumped 44 per cent to US$125.6 billion, beating analysts’ average estimate of US$119.7 billion. Earnings were US$14.09 per share, compared with analyst projections of US$7.34.

Investors expected a big quarter due to a COVID-19 resurgence that persisted through the holiday shopping season. Amazon emerged as the perfect pandemic business, giving people an alternative to stores and also benefiting from a shift in spending from services like restaurants and hotels to consumer products. Amazon Web Services, the company’s profitable cloud-computing division, also picked up business from growth in video streaming and remote work.

While the revenue forecast topped estimates, Wall Street will be watching how quickly online spending slows as more people are vaccinated and return to pre-pandemic habits like dining out, going to malls and traveling. U.S. shoppers will spend US$843 billion online this year, up 6.1 per cent from 2020 and a big slow-down from last year’s 32.4 per cent surge, according to researcher EMarketer Inc.

The increase in demand also added considerably to Amazon’s expenses. Cost related to COVID-19, which include lost productivity due to social distancing as well as stepped up cleaning throughout its warehouses and shipping centers, will add US$2 billion to expenses in the current quarter, Amazon said.

Shares were little changed in after-market trading after closing at US$3,380 in New York. Amazon’s value soared almost 70 per cent over the past 12 months, putting it with Apple Inc. and Netflix Inc. as the pandemic’s big-tech beneficiaries.