Ama­zon slides on Christ­mas sales slow­down

The Malta Business Weekly - - INTERNATIONAL -

A dis­ap­point­ing sales fore­cast for the Christ­mas sea­son sent Ama­zon shares slid­ing last week.

The on­line gi­ant said it ex­pected year-on-year sales growth of 10% to 20% for the three months to 31 De­cem­ber.

That would be a marked slow­down from the 29% jump in sales for the most re­cent quar­ter to $56.6bn.

Ama­zon also made record prof­its of $2.9bn in the pe­riod, com­pared with $256m last year.

That marked a fourth con­sec­u­tive quar­ter of more than $1bn in profit for the Seat­tle-based com­pany and came de­spite a 21% rise in op­er­at­ing ex­penses.

Added costs came from in­vest­ment in its Prime mem­ber­ship scheme, of­fer­ing home de­liv­ery from Whole Foods stores and cre­at­ing more orig­i­nal con­tent for Ama­zon Prime Video.

The profit surge has been partly driven by di­vi­sions out­side its ex­ten­sive re­tail op­er­a­tion.

Rev­enue from AWS, its cloud ser­vices busi­ness, in­creased 46% year-on-year to nearly $6.7bn for the quar­ter to 30 Septem­ber.

"Other" rev­enue - a cat­e­gory that pri­mar­ily in­cludes the firm's ad­ver­tis­ing busi­ness - jumped 122% to al­most $2.5bn.

Re­tail re­mains the firm's big­gest source of rev­enue, with the strong­est growth in North Amer­ica.

But it is fac­ing in­creas­ing com­pe­ti­tion, as other re­tail­ers - in­clud­ing low cost gi­ants such as Wal­mart - fo­cus on on­line sales.

On­line sales in the third quar­ter to­talled more than $29bn, 10% higher than from last year.

Ama­zon's phys­i­cal re­tail lo­ca­tions - most of them as­so­ci­ated with the Whole Foods gro­cery chain the firm ac­quired last year - brought in about $4.2bn.

Ama­zon ex­pects sales in the fourth quar­ter be­tween of $66.5bn and $72.5bn.

On a call with an­a­lysts, ex­ec­u­tives blamed the some­what mod­est Christ­mas sea­son fore­cast on fac­tors such as cur­rency fluc­tu­a­tions.

They also said com­par­isons were com­pli­cated by changes to the busi­ness, such as the ac­qui­si­tion of Whole Foods.

Chief fi­nan­cial of­fi­cer Brian Ol­savsky said con­sumer de­mand re­mained healthy: "We're very bullish on the fourth quar­ter - we'll just have to see where rev­enue comes in."

Af­ter end­ing 7% higher, shares fell al­most 8% in af­ter-hours trad­ing in New York. Ama­zon stock has jumped nearly 40% this year.

The un­der­ly­ing strengths of Ama­zon's busi­ness re­main, de­spite the dis­ap­point­ing fore­cast, said eq­uity an­a­lyst Ge­orge Sal­mon of Har­g­reaves Lans­down.

He added that the high ex­pec­ta­tions for the com­pany had raised the share price to lev­els where swings were to be ex­pected.

Neil Saun­ders at Glob­alData Re­tail said the re­tail land­scape had been shift­ing: "There is more on­line com­pe­ti­tion in on­line re­tail than there has ever been, and that com­pe­ti­tion is more ef­fec­tive than it has ever been."

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