Amazon expects to incur $ 4 billion in COVID-related costs next quarter, an estimate that provides a benchmark for other companies, large and small, looking to stay operational and control spending amid the pandemic.
The result: Amazon expects COVID to remain an unwanted companion until the end of the year with higher costs than the previous quarter.
The company said Thursday in its third-quarter earnings call that it has recorded $ 7.5 billion in COVID-related costs since the disease took root earlier this year. Amazon previously said its COVID costs were approximately $ 600 million in the first quarter and over $ 4 billion in the second. The company's COVID costs in the third quarter were about $ 2.5 billion, CFO Brian Olsavsky told an analyst during an earnings call. While Amazon was able to cut costs in the third quarter through efficiency, that number is on the rise for the next quarter.
Olsavsky said most of the cost increase is due to the expansion of its operations. Amazon hired 100,000 new workers in October.
COVID-19 along with other uncertainties related to the economy, holiday sales, and even weather patterns weighed on its fourth-quarter operating profit forecast. Amazon provided far-reaching guidance between $ 1 billion and $ 4.5 billion in operating income in the fourth quarter compared to $ 3.9 billion in the same period last year. This guide assumes approximately $ 4 billion in COVID-19 related costs.
But what's more significant is that even after providing a long list of possible uncertainties in the fourth quarter, Olsavsky noted that COVID still has the upper hand.
"So there is a whole host of problems that generally occur in the fourth quarter," Olsavsky said. "I think the fact that COVID is shrinking all of these elements is causing us a lot of uncertainty about our high-end range."
Olsavsky said the costs were related to productivity losses caused by changing the way it operates, as well as expenses related to personal protective equipment and other upfront costs.
"Most of these costs relate to ongoing productivity issues in our facilities, including process reviews to allow for social distancing and incremental costs to scale up new facilities, and the large influx of new employees hired to support high demand. of customers also includes investments in PPE for employees and better cleaning of our facilities, "Olsavsky said during Thursday's earnings call.
Amazon said Thursday that it continues to augment its internal COVID-19 testing program with a capacity reaching 50,000 tests per day at 650 sites by November.
