American electronic commerce giant Amazon posted a third-quarter loss of $437 million, which dwarfed its $41 million loss in Q3 2013. The online retailer warned on Thursday that losses in the next quarter may be larger still.
In after-hours trading in New York, Amazon.com shares sank eleven percent, reducing the company’s value by $15 billion. Shares had already declined by 20% since the beginning of the year.
In the three months to October, sales increased to $20.58 billion. Revenue came in at $260 million less than analysts’ estimates.
Analysts and investors have become increasingly skeptical about Amazon’s ability to one day turn its huge revenues into profits.
The Seattle-based company has been spending huge amounts of money on a range of new initiatives, including its $1 billion purchase of video game streaming business Twitch and the launch of its Amazon Fresh grocery delivery service in the United States.
In Q3 2014, Amazon was involved in a highly public dispute with the world’s fourth-largest book publisher Hachette, regarding prices of e-books, which triggered protests from authors. Analysts believe this negative publicity is starting to affect the company’s business activities. Third-quarter books, movies and music sales in North America expanded more weakly (4.8%) than in previous quarters.
(Source: Amazon.com Inc.)
Operating expenses surged to $21.1 billion, compared to $17.1 billion one year ago.
Shareholders, most of whom have patiently allowed the company to reinvest virtually all its profits back into the business, are now saying it is time to see some decent dividends.
Founder and CEO of Amazon.com, Jeff Bezos, said:
“As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever. In addition to our already low prices, we will offer more than 15,000 Lightning Deals with early access to select deals for Prime members, hundreds of millions of products across dozens of categories, curated gift lists like Holiday Toy List and Electronics Holiday Gift Guide, new features like #AmazonWishList, and a great new lineup of products like Kindle Voyage and Fire HD Kids Edition. And if you order your gifts on AmazonSmile, we’ll donate a percentage of your purchase price to your favorite charity.”
2014 fourth quarter guidance
Amazon expects net sales to be between $27.3 billion and $30.3 billion, or expand from 7% to 18%, compared with the same quarter last year.
Operating income is forecast to be between $430 million and (minus) $(570) million. In Q4 2013 it was $510 million.
