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Fri, Oct 24, 2008 - Page 10 News List

Amazon.com profit soars, outlook drops

SLOWING GROWTH The Q3 results suggest that the world’s largest Internet retailer will not be immune to a slowdown in consumer spending. Analysts remain upbeat about it


Amazon.com Inc said on Wednesday that its profit climbed 48 percent in the third quarter, but the company reduced its full-year sales outlook, showing that the online retailer cannot escape the weak economy. Its shares dived in after-hours trading.

Amazon chief financial officer Tom Szkutak, speaking on a conference call with analysts, said the company experienced slower growth rates near the end of the third quarter, coinciding with the onset of recent turmoil in global financial markets.

Amazon said it now anticipates full-year revenue of US$18.46 billion to US$19.46 billion, below the US$19.52 billion that analysts polled by Thomson Reuters were expecting. In July, Amazon had predicted sales this year of US$19.35 billion to US$20.10 billion.

Amazon shares fell US$6.82, or 13.6 percent, in extended trading, after finishing regular trading down US$0.24 at US$49.99.

Analysts were widely expecting the company to lower its guidance, but some said they were not expecting it to be lowered so much.

Lazard Capital Markets analyst Colin Sebastian said Amazon is clearly “feeling the impact of the weaker economy,” but added that “at the same time, they continue to grow much faster than overall e-commerce, so the platform does remain strong from that point of view.”

RBC Capital Markets analyst Stephen Ju still feels Amazon is “the best house on the block.” Still, he noted that the company’s new revenue guidance range is much wider than usual.

“I think the Amazon management team is generally more conservative than not, so I think they probably did contemplate certainly a bad scenario at the lower end. But that could end up being what it is if the consumer doesn’t show up during November,” he said.

For the third quarter, Amazon’s report offered few surprises to investors. The company earned US$118 million, or US$0.27 per share — US$0.02 more per share than what analysts polled by Thomson Reuters expected.

In the year-ago quarter, Amazon earned US$80 million, or US$0.19 per share. The company said its profit in the most recent period included a US$15 million foreign currency benefit.

Revenue rose almost 31 percent to US$4.26 billion, just below analysts estimates of US$4.27 billion.

Sales of items like books, CDs and DVDs rose 19 percent to US$2.49 billion, and sales of electronics and other merchandise jumped 52 percent to US$1.64 billion.

Amazon said that sales of book titles for its wireless e-reader device, Kindle, account for more than 10 percent of its total book sales. Amazon has not released sales figures for the Kindle device.

Szkutak said Amazon will not launch a new version of the product until next year at the earliest.

Revenue from shipping — which includes earnings from Amazon’s membership-based two-day shipping program, Amazon Prime and its third-party shipping program, Fulfillment by Amazon — climbed 12 percent to US$191 million.

It’s net shipping cost also rose to US$132 million from US$89 million a year ago.

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