Online retail platform provider Amazon.com reported third-quarter financial performance this week and yet again, provided another blowout quarter. There is now little doubt that this online retail platform provider is benefitting from the ongoing pandemic. Once more, the ability to continually pivot with added flexibility and capacity will be the subject of future case study. Recall that earlier this year, sensing the increased volume of online activity, the company pulled forward future capacity resources, in some cases capacity planned for 2022.
The financial headlines include quarterly revenues of $96.2 billion, a 37 percent increase, and a tripling of profits amounting to $6.3 billion. The numbers blew away all analysts expectations. Once more, this performance does not include the provider’s recent annual Prime Shopping Day promotion, where results will be booked in this existing quarter.
Operating cash flow increased 56 percent to $55.3 billion for the trailing twelve months. When all financial and lease obligations were factored, free cash flow net was $17.9 billion compared to $10.5 billion in the year earlier quarter.
There was also a narrative relative to the holiday fulfillment surge. Amazon CEO Jeff Bezos indicated to The Wall Street Journal: “We’re seeing more customers than ever shopping early for their holiday gifts, which is one of the signs that this is going to be an unprecedented holiday season.” That statement alone is a harbinger of the headline of these final two months of the holiday period. With COVID-19 infection rates now accelerating once again globally, this may well be the perfect storm of online.
Beyond the online shopping platform, the Amazon Web Services business unit recorded $11.6 billion in revenues reflecting a 29 percent year-over-increase. Operating income doubled to $3.5 billion, For the nine months ending September 30, this unit has generated nearly $10 billion in operating income, which is the basis of investment funding for other operating units including Amazon.com.
Looking forward to the final quarter, the company is now forecasting revenues to be in the range of $112 billion to $121 billion with operating income forecasted to be in the broad range of $1 billion to $4.5 billion.
In its release outlining Q3 financial performance, Amazon indicates among other accomplishments that the provider has donated more than one million emergency aid items to community partners providing ongoing disaster relief, along with millions of dollars in product and monetary donations to support communities disproportionately impacted by this ongoing pandemic. The provider has further created 400,000 jobs this year alone, including 100,000 permanent jobs. Founder and CEO Jeff Bezos also challenges other large employers to match Amazon’s minimum wage of $15 per hour for all full-time, part-time, temporary and seasonal employees in the United States.
While all of this is laudable, Supply Chain Matters would add that with this level of ongoing operating profitability, Amazon could step-up and do better. Not only in community giving and minimum wage, but also addressing even higher levels of wages as well as the onerous productivity, efficiency and workplace safety standards among Amazon’s vast network of operating facilities and leased logistics. Reports are increasingly providing visibility to such practices and while workers certainly benefit from added employment opportunities during times of economic crisis, they also deserve to expect assurances in safety and reasonable work practices. The notions of corporate profit-sharing can take on many dimensions.
Bob Ferrari
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