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Generous Jeff

30 April 2020 By Gina Chon

Jeff Bezos is planning a $4 billion handout, and his shareholders are at the back of the line. Amazon.com’s revenue jumped 26% in the first quarter, and the e-commerce giant thinks it could grow faster in the current quarter. As Covid-19 gives the company a boost, Bezos has smartly decided to share the spoils mainly with customers and staff.

The Covid-19 outbreak has created holiday-like demand for Amazon on a daily basis. But it has also brought problems, from logistical bottlenecks to unease among staff in the company’s warehouses. As a result, Bezos says he will plow all of the current quarter’s expected operating profit into virus-related spending on better service and help for employees. An expected $4 billion haul for the three months ending June 30 will now be somewhere between a $1.5 billion loss and a $1.5 billion profit, the company says.

Now is a good time to be showing appreciation for the workforce. Amazon has gone on a hiring spree, adding 175,000 employees as of this week. Spiking U.S. unemployment means the Seattle-based employer will find no shortage of recruits. But current employees have been protesting about conditions and pay. Warehouse workers, along with counterparts at other retailers, plan to protest on International Workers’ Day on Friday. Amazon faces calls to close distribution centers where staff have tested positive for Covid-19, and maintain pay during the closure.

While Amazon hasn’t broken out how the extra spending will work – some of the $4 billion reflects losses due to social distancing, for example – Bezos has the leverage to make a bold move. While many companies are reporting virus-related losses, Amazon’s total shareholder return so far this year is at 34%, compared to minus 8.5% for the S&P 500 Index. Amazon’s return on equity for 2019, the number that reflects how its shareholders are being served, was a generous 22%, according to Refinitiv data.

Amazon has already increased some benefits. It raised wages for hourly workers by $2 an hour and doubled overtime compensation until mid-May, bringing its total additional virus-related pay costs to almost $700 million. Spending on a happier workforce suggests a welcome new approach from the $1.3 trillion firm. At the same time, putting shareholders last in order to do so is classic Bezos.

 

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