Amazon Posted 44% Q4 Revenue Increase, Bolstered by Prime Day

Olsavsky downplayed changes resulting from Tuesday’s announcement that CEO Jeff Bezos will transition to executive chair in Q3. The move is part of succession planning put in place five years ago, he said. Amazon Web Services CEO Andy Jassy will assume the corporate CEO title when Bezos steps down in Q3. “Jeff is not leaving; he is getting a new job,” Olsavsky said, calling it a “super important role.”

Wedbush analyst Michael Pachter wrote in a Tuesday investor note it’s not clear Bezos will withdraw from day-to-day oversight of the business, “as we expect him to continue to be integrally involved in company strategy.” The analyst doesn’t foresee major changes at the company with Jassy at the helm, and expects the transition to be “seamless and largely inconsequential.” Q4 results were due to a more stable economy, continued imposition of shelter-in-place trends in many of Amazon’s markets, continued expansion into the “very large grocery segment, and outstanding execution,” said Pachter.

Amazon had $4 billion in COVID-19 operating costs in the quarter -- including additional employee pay during the holidays -- bringing total 2020 COVID costs to over $11.5 billion, Olsavsky said. The company continues to face “productivity headwinds” from the pandemic, including physical separation and new employee training, plus personal protective equipment investments and stepped-up cleaning in facilities.

Responding to an analyst’s question on the tough comparative sales Amazon faces for 2021, Olsavsky cited the uncertainty of the pandemic in comping against prior-year sales. Heightened sales of items like hand weights and computer monitors that consumers bought for shelter-at-home activities likely won’t repeat, he said. On the other side, Prime customers engaged more with program benefits last quarter, which could have a lasting impact with purchase frequency and use of digital benefits, he said.

On costs, Amazon saved about $1 billion in transportation costs in Q4 with travel largely shut down, Olsavsky said. Marketing returned to “more healthy levels” in Q3 and Q4 as inventory improved: “It wasn't fruitful to invest in marketing when you're having trouble hitting existing customer demand,” he said.

Commenting on the return of one-day shipping for Prime members, a perk that took a hit during the pandemic, Olsavsky said the service has been improving: "We had a lot of examples of deliveries right up to the last minute on Dec. 24 in the United States for holiday gifts." Issues last year involved capacity and volume and "getting things out the door and being able to then hit a shorter time period," said the executive. "So it wasn't that we were delaying or slowing down the shipment itself; it was the time taken to get through the warehouse and handle the backlog of demand." As the year progressed, timing improved and will continue to get better, he said. Some cities are back to pre-pandemic levels for one-day shipping, he said. Others are working their way out of backlog and volume issues. As "the dust settles ... and we open up more and more capacity, you'll see greater and greater one-day percentages for our Prime shipments."

Amazon's revenue guidance for Q1 is $100 billion-$106 billion, for growth of 33%-40% vs. Q1 2020. Operating income is expected to be $3 billion-$6.5 billion vs. $4 billion in Q1 2020. Guidance assumes about $2 billion of COVID-19 costs, said the company.