Amazon's Holiday Forecast Misses Expectations

E-Commerce Giant Grew Revenue by 20% But Recorded a $437 Million Loss

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<a data-cke-saved-href='' href='' title= forecast sales and profit for the holiday quarter that missed analysts' projections, underlining the limits to Chief Executive Officer Jeff Bezos's strategy of spending big to fuel growth.

Revenue for the current period will be $27.3 billion to $30.3 billion, the Seattle-based company said in a statement today, while profit excluding some items will range from a loss of $570 million to a gain of $430 million. Analysts on average projected sales of $30.9 billion and profit of $460.5 million, according to data compiled by Bloomberg.

The forecast is stoking investor concerns that sales growth will no longer make up for Amazon's lack of profit. Net income has been elusive as Mr. Bezos spends on products such as Kindle Fire tablets and smartphone and distribution centers, as well as drones and original programming. Investors have punished Amazon for its losses, with shares down more than 20% this year. That helped Chinese company Alibaba Group Holding become the world's largest e-commerce provider by market capitalization upon its initial public offering last month.

"It's a little ho hum as we get into Christmas," said Kerry Rice, an analyst at Needham & Co. "I don't think this is by any stretch a disaster here, but it's a little weaker than expected."

Chief Financial Officer Thomas Szkutak said the company trimmed back the holiday-quarter sales forecast partly because of exchange rates associated with the strong U.S. dollar.

Shares of Amazon fell as much as 13% in extended trading after closing at $313.18 in New York.

For the third quarter, Amazon posted a net loss of $437 million, more than 10 times wider than the $41 million loss from a year ago. Sales rose 20 percent to $20.6 billion. Analysts had projected a loss of $331.4 million on sales of $20.9 billion.

The company's sales growth rate didn't keep up with its rate of spending over the quarter. Amazon poured $21.1 billion into operations in the period, up 23 percent from a year earlier.

Most lucrative season
The fourth quarter is typically Amazon's most lucrative, given an influx of shoppers who buy gifts for the holidays. Amazon is ramping up to be ready, saying earlier this month that it plans to hire 80,000 seasonal workers in the U.S. to help process orders, up from 70,000 last year. In the U.K., Amazon has said it will hire 13,000 workers for seasonal roles this year.

Last month, Amazon introduced five new Kindle tablet models, including the $99 Kindle Fire HD, as it continues to seek more media consuming customers. The online company will open temporary pop-up stores in select cities such as San Francisco and New York through the holidays to give shoppers a chance to see and try its electronics.

Amazon also debuted a Fire Phone smartphone in June, which began shipping in July in a competitive market versus Apple's iPhones and Galaxy devices from Samsung Electronics Co. Amazon gave few details of how the Fire Phone is selling today.

"Whenever you launch something new, there's a wide range of outcomes," Mr. Szkutak said. "It's also early. We just launched the phone 90 days ago in the U.S. and just started shipping in Europe."

Amazon also secured a $2 billion credit line with Bank of America Corp. last month, giving it flexibility to continue investments in categories such as same-day grocery delivery, even if they aren't immediately profitable.

The company remains embroiled in a public dispute with publisher Hachette Book Group about the pricing of digital books. Amazon and book publisher Simon & Schuster inked a deal this week that the companies said would make books affordable for readers while spreading the wealth among the online retailer, publisher and authors.

--Bloomberg News

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