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Amazon Willing to Take on Losses in COVID-19 Response

By Donna Fuscaldo - May 1, 2020 at 12:30PM

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Amazon told shareholders it will spend $4 billion in the current quarter in keeping employees and customers safe during the pandemic.

Amazon (AMZN 1.12%), struggling through the hardest period in the company's history, is willing to take on losses as part of its response to the COVID-19 pandemic. 

Reporting first-quarter earnings, Amazon's CEO Jeff Bezos said that, during normal times, the e-commerce giant would generate roughly $4 billion in operating profit this quarter. However, the company expects to spend that money (and maybe even more) to keep its customers and employees safe while it maintains operations amid the COVID-19 pandemic.  

A woman in protective gear sitting on the couch with her laptop with toilet paper and produce beside her.

IMAGE SOURCE: GETTY IMAGES.

"Providing for customers and protecting employees as this crisis continues for more months is going to take skill, humility, invention, and money," Bezos said. "If you're a shareowner in Amazon, you may want to take a seat, because we're not thinking small."  The spending will go for personal protective equipment, enhanced cleaning of its facilities, and for more effective social distancing. Money is also earmarked to develop Amazon's own COVID-19 testing capabilities

"There is a lot of uncertainty in the world right now, and the best investment we can make is in the safety and well-being of our hundreds of thousands of employees. I'm confident that our long-term oriented shareowners will understand and embrace our approach, and that in fact they would expect no less," Bezos said. The tech stock said operating income in the second quarter could be in a range of $1.5 billion to a loss of $1.5 billion. It's targeting net sales of between $75 billion and $81 billion, up 18% and 28% respectively. 

During the pandemic, Amazon has seen a surge in orders as retailers shutter stores, and millions of people are sheltering at home. Sales during the first quarter jumped 26% to $75.5 billion. But the warning of an operating loss in the current three-month period dampened the strong showing for Amazon as the reality of the pandemic sets in. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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