Amazon zoomed past Wall Street’s high-end earnings forecast for the fiscal 2020 third quarter, with overall sales surging 37% despite a double-digit decrease in physical store sales due to the pandemic.
For the quarter ended Sept. 30, Amazon totaled net sales of $96.15 billion, compared with $69.98 billion a year earlier. Online sales came in at nearly $45.9 billion, up 38% (37% excluding foreign exchange) from $35.04 billion in the prior-year period.
Amazon’s physical store sales, which include Whole Foods Market, fell 10% to $3.79 billion from $4.19 billion in the 2019 quarter. That followed a 13% year-over-year decline in the second quarter, though sequentially physical store sales edged up 0.3% from the second to third quarters.
In a conference call with analysts, Amazon Chief Financial Officer Brian Olsavsky cited grocery as a bright spot in online sales, led by members of the company’s Prime customer benefits program.
“Prime members continue to shop with greater frequency and across more categories than before the pandemic began,” Olsavsky said in the call late yesterday.
“We’re also reaching more customers with our grocery offerings,” he told analysts. “In Q3, our year-over-year growth rate of online grocery sales continued to accelerate, and we’ve continued to offer more convenient options for customers, including grocery pickup, which is now available from all Whole Foods Market stores.”
As at other retailers, Amazon has seen reduced brick-and-mortar traffic because of COVID-19-related restrictions, including store closures, and customer concerns about the virus. On the food retail side, the Seattle-based e-tail giant had closed the majority of its Amazon Go cashierless convenience stores, but most of the shut locations have since reopened.
Olsavsky noted that Prime members are showing a higher level of engagement and using more of the program’s digital benefits.
“We like the trends on connectiveness to our Prime program, and we think that will have lasting value. When things open up a bit more and there are more store options for people to buy from, there will be a leveling of volume back to the stores, I would imagine,” he said in the analyst call. “So we think the trends are good. The adoption curves have been pulled forward from our pre-COVID thinking, especially on things like grocery delivery.”
Digital marketing firm inMarket reported that third-quarter foot traffic at Whole Foods was down 40.02% from a year ago. Visits by new shoppers fell 53.23% in the period, while micro-visits (trips shorter than five minutes), fell 36.45%. However, rival Trader Joe’s saw larger falloffs in those traffic metrics during the quarter, according to inMarket, whose analysis includes visitation habits, frequency and “dwell time” in-store on the shopper’s path to purchase.
Currently, Amazon’s U.S. physical stores include 487 Whole Foods Markets, two Amazon Fresh grocery stores, two Amazon Go Grocery stores, 26 Amazon Go convenience stores (four temporarily closed), 23 Amazon Books stores, 27 Amazon 4-Star outlets and seven Presented by Amazon pop-up locations (one temporarily closed).
At the bottom line, Amazon posted third-quarter net income of $6.33 billion, or $12.37 per diluted share, compared with $2.13 billion, or $4.23 per diluted share, a year ago.
Analysts, on average, had projected earnings per share of $7.41, with estimates ranging from a low of $4.62 to a high of $11.86, according to Refinitiv/Thomson Reuters.
Amazon forecasts fourth-quarter net sales at $112 billion to $121 billion, a year-over-year gain of 28% to 38%.
“We’re seeing more customers than ever shopping early for their holiday gifts, which is just one of the signs that this is going to be an unprecedented holiday season,” Amazon founder and CEO Jeff Bezos said in a statement. “Big thank you to our employees and selling partners around the world who’ve been busy getting ready to deliver for customers this holiday.”
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