Despite record profits close to $3 billion for the last three months, Amazon sales and sink to 8 percent in after-hours trading on Thursday. The world’s largest online retailer had crossed analyst expectation on earnings per share but missed on revenue estimates, which is projected to be slowest in years.
According to analysts, while the online competition was rising, Amazon sales and international results were disappointing and the third-quarter sales failed to meet the estimated value.
Due to its expensive bets on new programs and technology including acquisition of Whole Foods in 2017 for $13.7 billion, Amazon had rollercoaster profits for years. The revenue, however, was largely grown with drastic shift of consumers towards online shopping and away from conventional brick-and-mortar stores.
Amazon forecasts its fourth-quarter sales to grow between 10 percent and 20 percent or up to $72.5, lower than $73.9 billion expected by analysts. As reported in Reuters, the subdued expectations was a particular surprise and it will be the company’s lowest quarterly sales growth since the start of 2016; while the Amazon sales increased between 29 percent and 43 percent in the last four quarters.
On a conference call with media, Amazon’s chief financial officer Brain Olsavsky said that there are no changes in the fundamentals, just accounting differences and some holiday timing in India. “We are expecting a great holiday season and have everything ready to roll”, he added. Amazon’s holiday shopping season runs from the U.S. Thanksgiving in late November through New Year’s.
According to FactSet, Amazon’s fourth-quarter operating income guidance was also slightly below analysts’ expectations. They wanted to hear $3.87 billion, but Amazon forecast between $2.1 billion to $3.6 billion. In a statement, Amazon’s CEO Jeff Bezos emphasized the growth of Amazon Business and its marketplace for business customers. It serves millions of private and public sector organizations across eight countries and has reached $10 billion annual sales run rate, he added.
Reuters reported that the largest online retailer has remarkably become more profitable, despite slower sales growth rate. Third-quarter net income climbed to $2.88 billion from $256 million, a year earlier.