May 1, 2020 - Economy

Amazon's big coronavirus spending gets a cold market response

illustration of a hand about to smash an amazon box

Illustration: Sarah Grillo/Axios

Amazon announced Thursday as part of its Q1 2020 earnings that it’s planning to spend the $4 billion it would expect in profit next quarter on worker safety and resources because of the coronavirus pandemic — then its stock dropped 5% in after-hours trading.

Why it matters: If you’ve been wondering for the last six to eight weeks why some publicly traded companies seem to be resisting strong measures to curb the virus spread, this a big reason.

  • Not to mention that added pay and safety resources could create an expectation long-term from employees that they’ll provide these as a baseline.
  • Of note: Despite its statements yesterday, Amazon continues to face criticism that it’s not doing enough to protect workers in warehouses and its Whole Foods stores.

The market isn’t a huge fan of companies investing in workers’ well-being when it means smaller margins or profits, delays, or really anything that’s not immediately up and to the right.

Case in point: Last summer, Nintendo delayed the release of the newest installment in its blockbuster game Animal Crossing, and its stock price took a hit.

  • Later that day, Nintendo of America president Doug Bowser explained that it was to avoid employee burnout, which often occurs in video game development as teams near game release deadlines.

Yes, but: Risking employee’s safety and health — in a potentially deadly manner — is not worth trying to protect that stock price.

  • And luckily for Amazon, the company still beat analyst expectations on revenue for the quarter, and its advertising and cloud services divisions also kept growing along with demand on its e-commerce side.

Go deeper: Amazon workers plan sickout over working conditions

Go deeper