Ama­zon’s year-end deals surge

Financial Mirror (Cyprus) - - FRONT PAGE -

Ama­zon.com Inc.’s (NAS­DAQ: AMZN) hol­i­day sales may have been less than it planned.

Or, it has inventory in sev­eral cat­e­gories that had sales un­der fore­cast. Ei­ther way, the largest e-com­merce company in Amer­ica has a tremen­dous num­ber of items on sale just two days after Christ­mas.

Some of what Ama­zon calls its “Year-End Deals” are for sale at par­tic­u­larly large dis­counts their re­tail prices. Th­ese price cuts run through the end of the year.

Fash­ion items, dig­i­tal games and Kin­dle books are on sale for as much as 70% off.

Ama­zon might be mak­ing money on the Kin­dle books, since they are sim­ply dig­i­tal prod­ucts. But out­siders can­not tell what Ama­zon has to pay to pub­lish­ers or au­thors. It is harder for the company to make money on games like “Mor­tal Kom­bat Komplete Edi­tion.” The price of the game, dis­trib­uted by Warner Bros, has been dropped 75% from $19.99 to $4.99. Per­haps the price is meant to bring peo­ple to Ama­zon’s video game sec­tion, where it can sell con­sumers more ex­pen­sive games. If so, it would ap­pear to be a risky strat­egy.

Ama­zon is of­fer­ing up to 50% off on items that also likely cost the ecom­merce company more than it sells the items for.

Th­ese in­clude items like se­cu­rity locks and horns. One of Ama­zon’s strengths is sup­pose to be in­stant video. It has cut the prices of some prod­ucts in this cat­e­gory.

Fi­nally, in the up-to-30% cat­e­gory are cam­eras, home audio, TVs and head­phones. The mar­gins on Sam­sung screens Ama­zon sells can­not be very good, would have ter­ri­ble mar­gins on its own.

Ama­zon made a prom­ise about the cur­rent quar­ter. Wall Street was not en­thu­si­as­tic about the num­ber, so if Ama­zon has a poor sales quar­ter, the re­ac­tion will be worse.

When it re­leased its most re­cent quar­terly re­sults, Ama­zon’s man­age­ment fore­cast in its fourth quar­ter 2014 guid­ance that “net sales are ex­pected to be be­tween $27.3 bln and $30.3 bln, or to grow be­tween 7% and 18% com­pared with fourth quar­ter 2013. Op­er­at­ing in­come (loss) is ex­pected to be be­tween $(570) mln and $430 mln, com­pared to $510 mln in fourth quar­ter 2013.”

This is part of the prob­lem that has caused Ama­zon’s shares to drop by 22% this year.

In­vestors bet­ter hope the Ama­zon post-hol­i­day dis­counts were cre­ated to just clear out a lit­tle inventory.

(By Dou­glas A. McIn­tyre, Source – 24/7 Wall St.com)

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