Amazon profits fall short as company faces protests and monopoly fears
Amazon reported lower-than-expected profits in its second quarter of 2019, as it faces unprecedented pushback from lawmakers and consumers over its growing power.
The company reported secondquarter earnings of $2.6bn, or $5.22 a share, up from $5.07 this time last year but lower than analyst estimates of $5.57 per share, sending stocks falling in after-hours trading.
The earnings report marks the end of a streak of four straight quarters of record profit and come as Amazon is facing potential antitrust actions from the federal government. Activists, Amazon employees, and consumers participated in protests against the company on its annual Prime Day in July, a shopping event that made the company $4bn in 2018, over labor and privacy practices.
The actions seemed not to affect the bottom line for the company, which said Prime Day sales “surpassed the previous Black Friday and Cyber Monday combined”.
The company increased operating expenses by 21% in the quarter, investing $800m in one-day delivery services, which chief financial officer Brian Olsavsky said has taken a hit to earnings.
“We expect we will be working through that for a number of quarters,” he said. “It is a necessary strategy to compete with brick-and-mortar’s speed advantage to the customer.”
Amazon reported net sales of $63.40bn in the second quarter, up 20% from quarter one and beating estimates of $62.48bn. Amazon’s size makes missing profit expectations at this level less of a blow, said Nicholas Hyett, an equity analyst at Hargreaves Lansdown.
“Amazon’s profit problem seems to stem from the fact growth is no longer creating the operating leverage it once did, and very unflattering profit projections for next quarter suggest that’s a problem which is here to stay for the time being, at least,” he said. “Whether it’s a growing pain or something longer lasting remains to be seen.”