Eagle-eyed investors are looking past Amazon.com Inc’s double-digit growth in first-quarter earnings to spot signs that the Web retailer is not immune from broader economic uncertainty.
Even as Amazon’s chief financial officer repeatedly said he didn’t see evidence of US shoppers changing habits ahead of a possible recession, analysts on Wednesday were crunching numbers to find that the retailer had effectively lowered its sales expectations for the year.
Shares fell US$3.59, or 4.4 percent, to US$77.41 in after-hours trading. The stock had gained US$1.40 to close at US$81 before the first-quarter results were released.
YELLOW FLAGS
“Across the board, I wouldn’t say there are any major red flags, but there are enough yellow flags here,” said Tim Boyd, an analyst for American Technology Research.
He pointed to slower sales growth in both major US product categories — books, CDs and other “media” items, and electronics and general merchandise.
Adjusted for the effects of a weak US dollar, growth in international sales slowed down, too.
And while US margins improved, international margins worsened.
Amazon said that’s the expected result of offering items in new categories at aggressively low prices from the start.
Far from surprising, Boyd said Amazon’s sales seemed to be “returning to more normal growth” after a stronger-than-usual year last year.
Earnings in the January-March quarter climbed 29 percent to US$143 million, or US$0.34 per share, from US$111 million, or US$0.26 per share, in the same period last year. Revenue rose 37 percent to US$4.14 billion from US$3.02 billion in the year-ago quarter.
Both measures beat Wall Street’s expectations. Analysts surveyed by Thomson Financial had forecast, on average, a profit of US$0.32 per share on US$4.08 billion in sales.
“It is extremely impressive that they were able to grow like this in a difficult economic environment,” Boyd said. “People’s expectations have gotten ahead of what they [Amazon] can actually deliver.”
US ECONOMY
In a conference call on Wednesday, CFO Tom Szkutak downplayed the potential for US economic troubles to hurt the business, despite the fact that 51 percent of revenue came from North America in the quarter.
“We don’t have a lot of data points about the economy specifically, but what we’re seeing in our business is, it’s very solid,” he said.
Szkutak declined to answer questions about changes in what people were buying — more staples and fewer extras, perhaps? — or how much they were spending on each transaction.
Looking ahead to the rest of the year, Amazon forecast sales of US$19.1 billion to US$20.0 billion in revenue, more than the retailer had predicted three months ago.
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