Q2 2020 Amazon.com Inc Earnings Call
[music].
Thank you.
For standing by good day, everyone and welcome to the Amazon Dot Com Q2, 2020 financial results teleconference. At this time, all participants or any listen only mode. After the presentation. We will conduct a question and answer session. Today's call is being recorded for opening remarks I'll be turning.
The call over to director of Investor relation aided field.
Please go ahead.
Hello, and welcome to our Q2 2020 financial results Conference call.
Joining us today to answer your questions as Brian Olsavsky our CFO.
As you listen to today's conference call. We encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter.
Please note unless otherwise stated all comparisons in this call will be against our results for the comparable period of 2019.
Our comments and responses to your questions reflect management's views as of today July Thirtyth 2020, only and will include forward looking statements.
Actual results may differ materially.
Additional information about factors that could potentially impact our financial results is included in todays press release, and our filings with the FCC, including our most recent annual report on form 10-K and subsequent filings.
During the call we may discuss certain non-GAAP financial measures.
In our press release slides accompanying this webcast in our filings with the FCC each of which is posted on our IR website.
We'll find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.
Our guidance incorporates the order trends that we see today and what we believe today to be appropriate assumptions.
Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates changes in global economic conditions in customer spending world events the rate of growth of the Internet online Commerce cloud services and the various factors detailed in our filings with the FCC.
This guidance also reflects our estimate cidade regarding the impact of the covert 19 pandemic on our operations, including those discussed in our filings with the FCC and its highly dependent on numerous factors that we may not be able to predict or control, including the duration scope of the pandemic, including any recurrence.
Actions taken by governments businesses and individuals in response to pandemic.
The impact of the pandemic on global and regional economies and economic activity or for staffing and productivity.
In our significant and continuing spending on employee safety measures, our ability to continue operations and affected areas and consumer demand and spending patterns as well as the effects on suppliers creditors in third party sellers all of which are uncertain.
Our guidance also assumes among other things that we don't conclude any additional business acquisitions investments restructurings or legal settlements, it's not possible to accurately predict demand for our goods and services and therefore, our actual results could differ materially from our guidance.
And now I'll turn the call over to Brian.
Thank you for joining us today.
I'd like to start by thanking and recognizing the contributions of hundreds of thousands of Amazon employees and delivery partners and hundreds of thousands of small and medium sized businesses are working hard to serve our customers all around the world and he is uncertain times Amazon second quarter was another highly unusual quarter as I mentioned on our last earnings call, we began to see us.
And if we get increasing customer demand beginning in early March and demand remains elevated throughout Q2.
Strong early demand in groceries and consumable products continued into Q2, well demand increase during the quarter or other major product categories like Hardlines and Softlines.
The same time would continue to focus on stepped up employee safety, particularly in our fulfillment and logistics operations self insure the safety and well being of our employees and partners.
You too we incurred more than $4 billion of coded related expenses getting products to customers and keeping them. Please see largest portion of these costs related to compensation for our frontline employees, including higher hourly wages through the end of May and a more than $500 million. Thank you bonus in June.
We also experienced productivity headwinds in our facilities is included changes to over 150 of our processes to provide for social distancing as well as costs to onboard and trained over 175000, new employees, who are hired to meet the higher customer demand.
As $4 billion also included investments in personal protective equipment for employees and enhance cleaning for our facilities.
Our consolidated revenue and operating income significantly exceeded the top end of our guidance range strong topline performance was driven by increased consumer demand led by Prime numbers. We've continued to see high prime member engagement throughout the quarter.
Prime members shop, more often with larger basket sizes worldwide streaming video hours doubled year over year, driven largely by Prime video, we're reaching more customers with our grocery offerings online grocery sales tripled year over year existing prime member renewal rates improved and the prime member growth rate accelerated those in the U.S.
And worldwide.
Our threepi sellers, who are largely comprised of small and medium sized businesses also stepped up to help make more selection available for customers and as a result is small and medium sized businesses have seen significant growth in their sales.
Our third party seller services revenue grew faster than online stores revenue in Q2 with strong growth in both fulfillment by Amazon and merchant fulfilled or MSN seller sales third party units continue to represent more than half of overall unit volume helped by improved quarter over quarter growth in active sellers.
We are more committed than ever to supporting the success of the hundreds of thousands of small and medium sized businesses to sell their products and Amazon stores.
We were able to meet this heightened demand because we were also able to open up more fulfillment network capacity as the quarter progress with faster delivery across more selection.
I point to a few capacity improvements that have allowed us to enhance throughput.
First our regular head count grew 34% year over year as of the end of Q2 and continues to grow we welcome more than 175000, new employees in March and April many of whom were displaced from other jobs in the economy.
As we've seen demand remain high we're in the process of bringing 125000 of these employees into regular full time positions.
I would also note that Amazon is creating more jobs over the last decade than any other company and we are proud that we're continuing to create good jobs with industry, leading wages and great benefits during this challenging time.
Combined number of regular and seasonal employees is currently over 1 million.
We've also been able to expand the output in our existing facilities as you've had time to implement learn and interested on the new process pass we put in place.
Additionally, as a reminder, Q2 is typically our latest volume quarter for the retail business. That's not the case this year, but what that's meant is that we can flex into space normally used for second half peak demand. This led to strong operating leverage in Q2.
As we move towards peak in second half of the year, we will ramp up our space needs, even further and we'll be adding significant fulfillment center and transportation capacity in the second half of the year.
Turning to eight of US. This is nearly $43 billion annualized run rate business up nearly $10 billion in run rate in last 12 months.
Customer usage remains strong although growth varies across industries as a result of coven 19 crisis.
Lastly, I will touch upon our Q3 guidance, which we provided as part of our earnings release.
A few additional data points on this guidance.
Aspect to incur more than $2 billion in cobot related expenses in Q3 to help keep employs safe, including continued investment in social distancing pp any and testing.
Costs are expected to be lower than in Q2, primarily due to better cost efficiency at the high demand levels, we are seeing.
In addition, I'll remind you that the third quarter is typically when we open the majority of our new fulfillment network capacity and we expect the same this year.
We continue to invest meaningfully including $9.4 billion in Capex in finance leases in Q2 alone an increase of 65% year over year, primarily driven by investments in our fulfillment and logistics footprint. Once these buildings open their headwind to profitability as they ramp up and we prepare for Q4 peak.
2019, we increased network square footage by approximately 15%. This year, we expect to meaningfully higher year over year square footage growth of approximately 50%.
It includes strong growth in new fulfillment center space as well sort centers in delivery stations.
We expect the majority of this capacity come online in late Q3 into Q4.
Lastly, we plan to host Prime day in Q4, this year rather than Q3 as it has been in prior years.
The one exception is Amazon, India, which will host Prime day on August six and August 7th.
In summary, we know that people are relying on online shopping more than ever during this unprecedented time and we're working hard to add capacity to serve customers. We are extremely grateful to our employees across Amazon for continuously stepping up to meet the needs of customers.
With that let's move on to Q in AG.
At this time, we will now open the call up for questions. We at each caller. Please limit yourself to one question. If you would like to ask a question. Please press star one on your keypad.
We ask that when you pose your question that you pick up your handset to provide optimum sound quality once again to initiate a question. Please press Star then one on your Touchtone telephone at this time, please hold while we poll for questions.
Your first question comes from line of Eric Sheridan will you be US. Please proceed with your question.
Thanks, so much for taking the question.
Could you just diving on normal wise trends, you're seeing issue exit Julie get into July you made a push into essentials and deemphasized non essential. So you talked about in the last earnings call wheel or we terms. The company you getting the mix between essential versus normal Central's right in terms of offered to customers where are you in terms of return.
Turning to normal on next day to day shipping initiatives to drive crime and if there was any color on the state of affairs with either of those by Geo where region of the world that would be great. Thank you so much.
Sure Eric Thanks for your question so first on the trend so.
If you remember is.
We exited Q1 and spoke at the end of April we had taken a lot of steps in March and April two first limit the.
Incoming non essential products into our warehouses now.
Reversed that are or eliminate that.
Decision in mid April So we started normalize our.
Channel mix and I would say you know as we moved into late April in early May.
We expected that.
Because one of the sellers.
Toggle between my fan or be a sales that we would see.
MFN drop has picked up.
Such a large extent amex and remain strong even as that ph picked up so in a very favorable mix if you will.
Coming from March on.
To start to normalize a little bit more normal levels towards the end of quarter, but MFS still remains high.
On the product side, a lot of what we saw on March in early April was sales of consumables and groceries in safety items, and we talked a lot about the fact that that was coming.
At pretty much zero cost or soon to zero profit with you factored in that cobot related costs.
We've got better on our cost structure and we also resumed at more normal mix and I'd say early part of me. So since then I would say, it's getting closer to what we call in more normal mix demand is still super high and what we're seeing on yes, it's driven by prime members Prime member engagement their shopping.
More often they have lot larger basket sizes, there's still a heavy component of grocery.
Grocery online grocery sales tripled year over year in the quarter as we added capacity there so.
Well, there's shifts in the mix.
Based on what customers want it's looking a little more normal and staying at a very high level.
In one day.
We realize that.
My first priority is to keep our employees safe and the second is focused on getting our capacity increased.
Once we've done that.
We are working very hard to get.
Faster shipments and you've seen the one day to day recover through the quarter, but it's still probably considerably behind the.
Going in rate before any of the SAP. So well continue to work on that but again first priority is definitely keeping employees safe and second is.
Increasing our capacity.
Yeah. This is David I think you know just from a geographic perspective, Brian's opening comments there.
A lot of these order trends and activity years, you could see it at all from North American International segment are growing.
Doing well so a lot of those kind of trends and category performance is first party in third party stellar growth whether it be merchant fulfilled their RFP sellers were seeing a lot of growth cross border kind of similar similar type broad trends when you think about.
The U.S. in North America, as well as our international regions particular, more stylish international regions.
Our next question is from Mark Mahaney with RBC. Please proceed with your question.
Okay. So to just a quick follow up on the Eric's question, Brian When do you think you'll get back to par in terms of one day being one day and then secondly, these profit levels are Super high now they are becoming Super high at the company you know if you ex out the cobot costs is Jeff aware of how profitable. The company is becoming as you happy about it and I'm kind of being facetious, obviously went.
I asked that but I would I also want to ask really is.
When you think about new investment areas.
And that the topped the list of you know maybe some new international launches are really building out some of the market that youve, we've done like India, Brazil, and Mexico or the business to business operations like there's a ton of new investment areas and it seems like the Amazon historically and I'm sure. It's the same now would be using this you know kind of revenue search and really investing aggressively in these new areas. So just.
Talk about that I know, you've got spend on cold, but as you think about the next three to five years, you've got these really.
Profit searches how can you deploy those or do you how do you want to deploy those and so some of the newer investment areas. Thanks a lot.
Sure. Thanks for your questions Mark first on when we get back to par we don't know yet we're getting progressively better but we're also balancing what is going to be very stepped up demanding capacity in Q3 in Q4. So if you look at our historic run rates and can.
See how big a quarter Q2 was Q2 was actually higher revenue than Q4 of last year, which is unheard of in Q3 is now forecast to be also higher than Q4 last year. So we've kind of moved to peak forward and for different reasons and we're trying to.
Mainly like as I said first priority is getting is make sure employees are safe and that we continue to do social distancing keep everybody.
Yes, safe and healthy.
Second priority is getting capacity online because we do not have.
Second in Q2, we generally have lower revenue in Q2 like I mentioned, we are able to use the excess capacity that did exist to serve the higher demand now.
Moving to Q3, we're starting to we need to build the inventory more for Q4, Q4 and up we've run out of space. So.
We've got our hands full on that challenge, but we've got do you know a really good team that's been working very hard.
Probably since late February on this issue and when you talk about profitability I will also mentioned that they're a couple of expenses that have gone down and then in the interim marketing we kept marketing probably by about a third in.
Q2, as mainly because we're trying to manage demand started normalize and get back to its somewhat normal levels in Q.
At the end of Q2, but and therefore, we'll see a higher level in Q3, but certainly marketing costs were lower probably saw that a lot of companies.
Travel expenses have almost ground to a halt.
Meeting costs, you know, even medical costs and some examples or in some cases or have been delayed as people are you don't go to Dr. John you go there is quickly we think that will normalize over time.
And as far as investments I do you know we've got a lot of investments already in place. So I don't think it's a matter of the Shirley accelerating investment or.
Yeah, we're always looking for new investments that makes sense to us but during this time I see I would say weve actually accelerate or ops investment pulled and capacity that we probably didn't take would be needed until 2021.
Maybe maybe later [noise].
Excuse me on grocery we've also.
Greatly expanded our grocery delivery capacity and that's probably ahead of schedule.
Yes. This is Dave just to add to that I think you know prime is such a big focus and some of the.
Gross statements that Brian talked about of the opening the call whether it was strengthen a prime membership or any acceleration we saw in the U.S. or worldwide are.
If somebody usage, that's like the grocery momentum or the doubling of video hours. It's for US. It's just another encouraging sign we think theres still a lot more value we can add to that program and that's not just in the United States, where its <unk>, we've got it sort of broader set of services than somebody other regions, but really focusing on that's supporting and some of those other regions.
<unk> and so we've got places like.
Australia, the middle East.
You've talked about India, many times, but ought to focus on building that out I think what's great about a place all geographies into places like India is you know, we're really focused on digitizing the the Indian sellers a lot of micro small and medium size businesses. There. We watch the new features there to help support that digitization efforts with.
Some of those brands and just a lot of work great work being done them by that team.
They have some goals around or getting more sellers onboard and hiring many more people as well so a lot of folks there.
Our next question comes from Brian Nowak with Morgan Stanley. Please proceed with your question.
Thanks for taking my questions I've I have to.
The first one Brian just going back to the investments and you're you're often making multiyear investments for customers and customer offerings and you know you're the you're the you them and the capital allocation plan I guess I'd be curious to hear about can you give us. Some examples of areas of investment that may have been pushed out this year because of shelter in place.
In the higher demand that you've been seeing so what we're areas where you thought you were going to spend more at the start of the year than you actually have now in the current 2020 plan and then the second one the international strength I appreciate the color on Europe, and Japan, and I see the profitability, maybe just talk to us sort of qualitatively about some puts and takes around your.
Your core international markets, Europe, and Japan, and how to think about whether or not they could be more or less profitable than the U.S. long term. Thanks.
Sure I think starting at that second one if you will notice that the international segment was was profitable this quarter and that's great sign or it is heavily driven by the pickup in demand that we saw a as I've mentioned I believe in a multiple calls what's going on internationally as we have some very.
Healthy establish countries that we've been in a long time and b as probably accelerated their adoption of prime benefits.
Push a video and devices and music and other things should this country is probably earlier in the lifecycle then you would've seen in the U.S.. So there's a bit of afford investment on prime benefits in many of those countries.
But.
But you also see our investments in new countries, obviously, India's the biggest one.
But also you know to a lesser extent, the middle East, Brazil, Turkey, and Australia. Our recent additions so there's always an element of.
That expansion going on there.
Advertising is growing so that's good source or profitability, but if you look at what happened in Q2. It was essentially just the.
You know much higher volumes than.
We had anticipated or I had on a run rate so our fixed cost for leverage to the helped obviously would add some capacity and things and transportation and fulfillment centers.
All other fixed costs were pretty much leveraged on that higher demand that do you can't particular was very strong because is probably more ah stay at home waters and or the way the economy. It was developing in the UK weight and very very strong quarter there.
So I would say that the.
Surge in demand internationally also helped drive that profitable or maybe a little earlier than the trajectory would have.
Ah shown and you know not sure that that is going to continue for the next couple of quarters.
But it's a good try as good a sign that we could leverage that and a lot of the same trends in the U.S. were apparent internationally higher prime or more frequent prime purchases and hire a basket sizes. So all good science and perhaps we got a glimpse of the future on the demand curve.
Hi, Your second question is on slowing investments.
The list is very short on what Weve had to slow down it's mostly a it hasn't been done necessarily for cost reasons. It's been done for people reasons. One I'd point to studios you know we've had to if you delay production Cmos studios have and.
That's been augmented by some new things like our Amazon cinema, where we're having first run movies and so I think in this time when people want entertainment people are having trouble, creating new content across the board and that's good that's a bit of a challenge, but it's not something we're doing intentionally.
We're doing it to protect the actors and film Krizan.
We think that's right decision.
As I said a lot of the investments are being pulled in especially on the upside in grocery delivery or same store pickup.
Number of whole foods stores that you can pick up deliveries on tripled this quarter. So.
Lets the short on things that were slowing down on I would say, it's just we're adapting.
And you know probably looking at whether some things have changed and you know, creating some things for the new environment, especially the entertainment area.
Our next question comes from Doug Anmuth <unk> with JP Morgan. Please proceed with your question.
Thanks for taking my questions Ive to Brian first just I'm curious about your overall thoughts on how the ecommerce adoption curves has been shifted here over the next few years.
And anything you can share around behavior for new and existing customers and then separately on a ws. The 43 billion dollar run rate, obviously slowed some in the quarter, but I hope you could comment just on the piece of IC decision, making in this environment or whether you're still impacted by some clients you know more highly exposure.
Goes to challenged verticals and due to those factors is it possible that HW S.K. not accelerate growth going forward. Thanks.
Yeah, let me start with that secular thanks, Doug so in need of U.S. Ah Ah.
Segment revenue, what we see or companies working really hard right now to cut expenses, especially in the more challenge businesses like hospitality and travel, but pretty much across the board.
Well, we're helping them we're actively with our salesforce looking for ways that we can help them save money. This includes things like scaling down the usage, where it makes sense or you know benchmarking their workloads against our architectural best practices. So that's not going to help our usage growth in the short run put it helped us customers save money and.
And we think that's the right thing to do not only for their success and so they can come out of this at a better and better shape, but also for the long term health of our relationship with them as a native iOS provider, but we're also seeing a lot of companies that are you really wishing that they had made more progress on the cloud because they're seeing how companies that are on the cloud kidding.
Oh, Yeah turn into a variable cost and your scale up or scale down depending on their particular situation.
I realize there on promises infrastructure is not really flexible to go up or down and especially in a time of sticking demand. It's a it's a big fixed cost for them. So we expect it we're seeing my gauge migration plans accelerate they're certainly not going to happen overnight, but we see companies moving more in that direction, we think that to be a good long term.
Trend.
And there certainly winners in this.
Area right now things like video conferencing gaming remote learning and entertainment all are seeing a usage growth and its you know, it's it's a bifurcated world out there so.
The on your ecommerce adoption I think it's hard to tell you know we're super encouraged by that.
The fact that grocery delivery has picked up and that's a bit accelerated versus what we thought.
We certainly are I'm glad to be there for our prime members, who are shopping more frequently and buying more.
We do know that there there's reasons that there are other options are limited I mean, there's always retail options out there, especially to go pick up in store, but less people want to go into stores, perhaps now so.
We're going out to see you know what a is that maybe as a step up in the curve in getting to a point quicker versus a you know whatever somewhat <unk> onetime sales and things like hopefully things like masks and gloves and cleaning supplies.
In the form the sometimes become onetime purchases, but we'll see.
Im sorry, your last point it was on new customers versus existing customers. We're seeing similar trends, we're seeing good pickup in.
Frequency and basket size for new members in prime as well, yeah, certainly not not at the same as.
People are that prime members for number of years, but it's encouraging and as you thought you know prime growth retention has.
<unk> increased we've accelerated the.
The number or the growth of prime members, both in the U.S. and internationally. So that's a good side that we're we're happy about and we hope that that has long term.
Ramifications.
Our next question comes from Ross Sandler with Barclays. Please proceed with your question.
Yeah, just to follow up to that last comment so the a prime behavior for international Prime members you got to talk about how like in those 16 17 countries.
You know the overall service levels are a little bit behind selections little bit behind so has the cause of the last few months into pandemic.
Close that gap meaningfully in terms of GMB Pro Prime member for international versus what you see in the U.S. than any comment there and then.
On on the through your guidance.
Let me put prime day for western markets into Fourq, you. So how much of the deceleration is obviously really strong number for threeq you, but the growth rate decelerating a little bit is that mostly from prime day or can you just talked about.
What kind of behaviors, you're seeing right now as you go into Threeq you. Thank you.
Right [noise].
Well.
Yeah, we ramped up to the quarter in Q2 and ended up with a 41% year over year growth in FX neutral on an FX neutral basis, yeah, a lot of those trends are continuing into Q3.
Three you see our revenue a range is 87 billion to 93 billion coming off a 89 billion dollar quarter. So.
I would say that the.
The ex the if you look at the growth rate that translates into somewhere in the 24% to 33% growth rate in Q3. So.
I can't break out exactly the prime impact because there's.
But suffice to say, it's a big a big.
Driver on why 41% growth in Q2 turns into their 24% to 33% growth in Q3.
On what turns out to be higher revenue volume.
And then I Prime behavior, you know, it's a Kimberly give you more on that because it it is actually a very localized.
Instead of stats by countries in international aggregate does not matter that much and what I would say is generally what we're seeing is similar trends and international in response to kill that.
Purchasing patterns I wouldn't say close the gap I said, yeah, I would say they both went up and we'll see how it goes from there I think just they are definitely.
Any light as differences and selection or differences in a shipping is there's Morocco, a a myriad of factors that go into a prime members.
Decision to be a prime member and to what they buy and what they use as far as our benefits that we give them. So I don't want make too many sweeping comic comments on that right now.
Our next question comes from Brent Thill with Jefferies. Please proceed with your question.
Thanks. Good afternoon I was curious you could just expand on either U.S. So there was a little bit of slowed on a go forward in a number of the cloud on numbers Im just curious if there's a a common thread that you're seeing there and perhaps just talk about the backlog I know you disclose the backlog has been improving.
And the filings, but a little more carney and I guess would be certainly helpful. Thank you.
Yes, sure I'll give you the backlog number it crew, 65% year over year and 21% quarter over quarter.
So you know that's healthy and we have you know the average contract contract length is over three years for E.W. US contracts I would say you know a contract volume and ER negotiations are strong and fat you know have maintains through this period.
So it is Ah that's good sign a it really does boil down to get a short term versus long term incentives here for a lot of our customers there or if you're if you're in a industry. That's been a heavily impacted by Ur cobot and the economy, you're you're looking for.
As to save money and you're trying to do a quick and we're trying to help in that regard and fund the best way to save money long term is to you use the cloud.
No not only to turn it into a variable cost could be a fixed cost but.
But also to to be able to take advantage of the.
Partner network that we have the security.
That we have and also the.
Constant evolution of products and services that we bring to market.
Our next question comes from Aaron Kessler with Raymond James. Please proceed with your question.
Great. So a couple of questions. The first maybe just a one of your competitor matter that growth was flowing in some markets that have opened up I guess, probably more in Europe, where just thought there are you seeing any change in his remarks that are starting to open up and is that any commentary on as the exact question. How you kind of can use that technology at longer term as well. Thank you.
Imagine immuno consumer business, though.
Congrats opening up yes, well, we still see strong strong demand. So I don't have any particular color on that regard.
By country.
We do think.
Probably the UK was a very grew very strongly in Q2 in that I believe is starting to moderate a bit but still stronger than normal. So I want to go by country, but I think.
Yeah those trends.
I will start to perhaps can become evident but the prime from our vantage point the prime members still continue to yeah order or more frequently and larger basket sizes.
Yeah and in the Air just on your second question on Zix, I mean, it's I'm not too much to say at this point, it's still pretty early but I think you know probably goes without saying, it's a it's a tremendously forward thinking team, which resonates with us and.
And they really do kind of pioneer in that space the.
Ride hailing.
Space. So a lot of cool work, they're doing designing autonomous vehicles and focused on the passenger right in front of mind in that so I think again I'm just as we think about how the innovation components and commitments to solving a.
Problems and challenges for customers.
It's pretty exciting for us to be able to work with them and bring that vision to fruition in the years ahead.
Our final question comes from Justin Post with Bank of America. Please proceed with your question.
Right a couple of questions, obviously, a great cost quarter on the leverage side any changes in ecommerce gross margins to call out its scale and getting size, improving gross margins or or anything on the mix shift there. That's interesting and then secondly, you know we're talking about lot about one day.
Investment last year, obviously, the shipping times were impacted by cobot, but how are you are you back to kind of normal times and where are you on the one day investment. Thank you.
Sure on one day again, where were first prioritizing employee safety we have [noise].
A lot of effort in that regard we've changed over 150 process pads.
Have instituted social distancing cleaning temperature, taking both with a you know warehouse a employees and also our transportation employees. So that's a really still priority one and second is capacity expansion, especially as we head into second half the year, which.
Generally sees a step up in volume even out with the first half year. So.
We will we are improving the a percentage of one day, we're not back to where we were pre show it.
We don't think we're going to be back in the short run <unk>.
But we will continue to improve it and ER and hopefully will be less noticeable for for our consumer base on the gross margin side. You know, it's very much a mixed bag right now there's you know before the before the Ur cobot outbreak the positives were generally A.M.C.L. costs.
Delivery costs were.
Becoming more efficient advertising was an atypical glassware certainly a strong.
Component up gross margin increases I'm.
Product mix could go either way, depending on the country, but as this covered as played out consumables and grocery which are lower margin have started to have said, it's been a negative impact on gross margin but.
The Oh, we feel good about where we are.
Gross margin for the quarter was 40.8, and what was down 200 basis points from last year, it's probably more tied to the eye Institute yeah. The the.
Addition of one day shipping and even though we didn't do as much one day shipping as we've been doing supposed to cope with the cost of one day shipping already built into our structure, we've already reconfigured our network we've already.
Created the capacity to be able to ship. Its just a matter up you know whether or not we can get it out through the warehouse and to you in one day or not.
Thanks for joining us today on the call for your questions. A replay will be available on our Investor Relations web site at least through the ended the quarter. We appreciate your interest and Amazon and look forward to talking with you again next quarter.
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