August 23, 2017

Amazon’s Profit Falls as It Spends Heavily on Distribution Centers

On Thursday, Amazon told investors it’s still not time for a drink.

The Internet retailer reported a 37 percent decrease in profits for the first three months of the year.

That drop was expected, and it was even a bit less than some investors had forecast, which initially helped lift the company’s shares slightly in after-hours trading. The stock eventually ended up falling about 3 percent in after-hours trading.

Amazon said its net income for the first quarter, which ended March 31, fell to $82 million, or 18 cents a share, from $130 million, or 28 cents a share, a year earlier. Revenue jumped 22 percent to $16.07 billion from $13.18 billion.

While the company’s profit was better than analysts had expected, its revenue fell slightly short. Wall Street analysts expected Amazon to report earnings of 9 cents a share and revenue of $16.16 billion, according to an average of their estimates compiled by Thomson Reuters.

Amazon previously told analysts to expect its sales to grow to between $15 billion and $16.6 billion, or somewhere from 15 to 26 percent.

“It’s more of the same from Amazon,” said Colin Sebastian, an analyst at Robert W. Baird Company.

Mr. Sebastian added that the waves of investments that Amazon was making were unlikely to abate soon. “That’s going to be a continuing trend,” he said.

The seeming indifference of many investors to Amazon’s slim profits shows how much more effective the company has been at articulating its vision of future opportunities to Wall Street than another tech favorite, Apple.

Apple, which made a profit 116 times bigger than that of Amazon last quarter, has been plagued by investor doubts about its growth prospects, driving its stock down 33 percent over the l ast year.

Amazon’s shares are up 38 percent in that period.

Jordan Rohan, an analyst at Stifel Nicolaus, said investors had been reassured by comments from Amazon management that suggested the company was not being hurt as much by weakness in European economies as another e-commerce giant, eBay. “That’s an acknowledgment that the growth outlook for Amazon remains quite robust,” he said.

Amazon is spending heavily on fulfillment centers to speed delivery of physical goods to customers. It is also investing aggressively in data centers to expand its Amazon Web Services business, which provides start-ups and big corporate clients with computers and bandwidth they can rent as needed for their online initiatives.

Then there are the consumer devices that are becoming an increasingly important part of Amazon’s plan to deliver media electronically to customers. The company’s Kindle e-readers are now a full-blown family of tablet computers, which it sells for little or no profit, with the goal of making money over the long term by selling books, movies, music and other services.

Amazon is also developing a television set-top box that it is expected to announce in the fall, a device that could give its video services a more meaningful audience in living rooms. The company recently introduced pilot episodes for 14 original comedy and children’s television shows and is soliciting viewer feedback to determine which ones will be turned into full series.

In a conference call, Tom Szkutak, Amazon’s chief financial officer, repeated an oft-stated Amazon motto about its priorities. “We believe putting customers first is the only way to create lasting value for shareholders,” he said.

Article source: http://www.nytimes.com/2013/04/26/technology/amazons-profit-falls-as-it-spends-heavily-on-distribution-centers.html?partner=rss&emc=rss