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Amazon’s Revenue Surges But Disappoints

31 January 2014

From The Wall Street Journal:

Holiday sales lifted Amazon.com Inc.’s fourth-quarter revenue 20% over a year earlier, spurring profit but not enough to match Wall Street projections.

The Seattle retailer’s shares tumbled in after-hours trading on the results and a disappointing outlook for its current quarter. Amazon said it could lift the $79 annual fee for its popular Prime two-day shipping service by as much as $40.

. . . .

The company ramped up expenses during the quarter, hiring 70,000 temporary workers at its warehouses and distribution centers in expectation of big sales gains. But the holiday season was marred by shipping problems at United Parcel Service Inc.  that caused some customers to get their packages after Christmas prompting Amazon to issue $20 purchase credits.

. . . .

Amazon Chief Financial Officer Tom Szkutak said higher use of Prime two-day shipping and “the increased cost of fuel and transportation” were factors in considering raising the membership price by between $20 and $40 a year in the U.S. Mr. Szkutak said the addition of new services to Prime, like streaming video, were making the program more costly to operate.

. . . .

For the fourth quarter, Amazon reported net income of $239 million, or 51 cents a share, compared with $97 million, or 21 cents a share, a year earlier. Analysts were expecting a per-share profit of 66 cents, according to Thomson Reuters.

. . . .

Sales rose to $25.59 billion from $21.27 billion. Amazon in October had estimated sales would range between $23.5 billion to $26.5 billion. Analysts were expecting $26.1 billion.

Link to the rest at The Wall Street Journal (Link may expire)

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17 Comments to “Amazon’s Revenue Surges But Disappoints”

  1. Prime would still be worth it at $120 a year. I guess that makes me a Zonbot.

    • We are the ‘Zon. You will be assimilated.

      Seriously though, Prime paid for itself in the first two months for us when it was still $79. And when we were still living in Houston. Imagine how useful it is living in rural Ohio when the nearest bookstore (and Target) is an hour away.

      • Exactly. Rural anywhere, it’s a blessing. Plus streaming vid. It’s probably less appealing to someone in a city, but for me, it’s crucial.

        • It takes me about four minutes to get to an array of stores, but I still do my shopping on Amazon — making good use of Prime. And today I’m streaming The West Wing. The whole series. For free. I don’t use the free book-borrowing feature much (only twice so far) because I find the selection process to be incredibly tedious.

          Even when the price of something I want is lower elsewhere, I choose Amazon. I think that means my brain is thoroughly washed.

  2. So, let me understand this. Last year, the 4th quarter generated profits of 21 cents per share. And this year saw 51 cents per share profits. But everyone is disappointed? Just because they were expecting 66 cents per share? Geez! The trouble expectations will bring!

  3. It’s obvious–growth is slowing at Amazon. Only 2.5 times the amount from last year? I’m selling my shares and putting my money on Big Publishing.

  4. If you generate more than $0.01 profit, when there are things you can be investing in to make your business better, then you aren’t doing your job. This has always been Amazon’s goal, and they’re right.

    Historically, companies that do well begin to slow when they STOP finding things to invest in and start racking up profits they can’t do anything useful with. Amazon isn’t in business to sweeten the IRS coffers.

    Corporations are money engines, not banks.

    • What’s so bad about a company that reaches the right size and stays there?

      Most companies I’ve worked for that failed did so because they expanded faster than they could manage. Just because you can throw money at something (‘quick, let’s hire another thousand programmers’) doesn’t mean you should.

      • Name one well-known company that was able to sit on its hands after finding its sweet spot. The world (and potential competitors) continue to evolve. Not a lot of horseshoe crabs or coelacanths in the business world.

        I grant you that overexpansion on borrowed money or inadequate staffing is a killer, but when you’re generating your own internal profits and using them to fund exploratory business lines, all you have to do is kill those business lines if they become a problem. The part of your business that is solidly profitable will continue quite healthily while you plan to try something else.

        • I believe Morgan Cars are still doing OK, after famously refusing suggestions from a management expert for how they should grow bigger on a TV show a decade or two back.

          Any company that relies on perpetual growth is doomed in the long run, because it’s impossible. A company that finds a niche where it can do well can do well for a long time.

          Indeed, one could argue that the current economic catastrophe is due to banks pursuing a ‘damn the economy, full steam ahead! Lend more, who cares if they can pay it back?’ growth policy over the last couple of decades.

          • I like Morgans, too (really), but they’re not a publicly traded company. Like the Danny de Vito character says in “Other People’s Money”, the last buggy whip company left standing probably had the finest buggy whips in the world, just before they died.

            If we’re counting on the firm that brought us the (splendid) three-wheeled Morgan to serve as a model of stock investment practice, I would maintain we need a more mainstream choice.

          • “Indeed, one could argue that the current economic catastrophe is due to banks pursuing a ‘damn the economy, full steam ahead! Lend more, who cares if they can pay it back?’ growth policy over the last couple of decades.”

            In fairness, they were cajoled, threatened, and basically mandated to do so by the Federal Government, in the name of affordable housing.

  5. It seems silly, but that’s the way the stock market works. It’s all about expectations.

    The stock was trading at a price that reflected the 66 cents in revenue, or whatever people expected. Amazon didn’t get the 66 cents. That doesn’t mean their stock is bad, but it wasn’t worth the earlier price.

  6. It’s a buying opportunity.

  7. The stock market (and in particular stock market analysts who can trash a company because they made a few cents less profit per share than the analyst WANTED them to make) is ridiculous.

    I’ll keep my Prime membership if it goes up. Like others have said, it pays for itself fairly quickly via free shipping. Not only do I live a goodly distance from stores, but they carry less and less of what I need these days, and I am past enjoying driving to 5 different ones to find things they used to carry (and often still coming up empty handed).

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