Amazon meets 2Q expectations

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IOL pic july27 amazon earnings Associated Press on Thursday reported second-quarter earnings that matched Wall Street's meagre expectations, but its revenue gains and outlook for the current quarter fell short of forecasts.

Los Angeles - Online retailer on Thursday reported muted second-quarter earnings and projected an operating loss for the current quarter as it absorbs the costs of a warehouse technology acquisition and plans to spend more on order-fulfilment centres ahead of the holidays.

Amazon said its profit was hurt by a $65-million loss related to its acquisition of Kiva Systems, a warehouse technology company that Amazon agreed to buy in March for $775-million in cash. The deal closed on May 1. Amazon is hoping that Kiva's automated systems help boost productivity and improve profitability in the long run.

The Seattle-based company said it expects third-quarter revenue to grow between 19 percent and 31 percent from a year ago. That amounts to sales of $12.9-billion to $14.3-billion. The midpoint is short of the $14.1-billion expected by analysts, according to FactSet.

It also forecast a third-quarter operating loss of $50-million to $350-million.

Chief Financial Officer Tom Szkutak said the projected loss was due in part to investment in the company's fulfilment centres ahead of the all-important holiday quarter. It plans to open 18 new fulfilment centres this year and has opened six so far, he said.

After initially falling, Amazon's shares rose $2.63, or 1.2 percent, to $222.64 in extended trading following the release of the results.

Amazon reported net income in the three months to June 30 came to just $7-million, or a penny per share, a drop of 96 percent from $191-million, or 41 cents, a year ago.

That matched analysts' meagre expectations.

Revenue grew 29 percent to $12.83-billion, which was short of the $12.90-billion expected by analysts.

Amazon said that revenue was weighed by currency movements to the tune of $272-million, which the company had forewarned of in April.

Sales of digital goods like Kindle e-books, music and movies rose 13 percent to $4.12-billion, while sales of electronics and other items rose 38 percent to $8.16-billion.

The Kindle Fire, a $199 tablet tailored to handle purchases from, remained the company's top-selling item.

For now, it appears investors are giving the company's lacklustre forecast a pass. Earnings for the fiscal year through December are estimated by analysts to be just $1.17 per share, meaning shares are trading at an eye-popping 190 times earnings.

Apple shares trade at around 13 times earnings while Google shares trade at around 14 times earnings. - Sapa-AP

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