ARTICLE: http://www.ft.com/intl/cms/s/0/38f60dae-f568-11e2-94e9-00144feabdc0.html#axzz2gfXnExC7
I thought this was an interesting article to respond to post-our Amazon presentation. This article was posted on July 25, 2013 and it reports a quarterly net loss for Amazon of $5 million or $0.01 a share in the 3 months to the end of June in 2013. This came as a surprise, as analysts predicted a net income of $28.8 million in the same quarter. The net loss was mainly due to the online retailer pumping money into warehouses and digital content, fueling sales growth at the expense of profit.
To be specific, the sales of the company soared by 22% to $15.7 billion which were the exact numbers predicted by analysts. The resulting net loss stems from costly investments that the company is making. CEO Jeff Bezos long term vision for Amazon is to steer it to digital products like the kindle tablet device and digital contents for its Amazon prime video streaming service. Other important investments include the money spent on warehouses to be closer to the customers ensuring efficient shipment as well as building a bigger presence in China.
The press release for the second quarter ended June 30th 2013 is below:
http://www.ft.com/intl/cms/s/0/38f60dae-f568-11e2-94e9-00144feabdc0.html#axzz2gfXnExC7
The company’s operating margin was just 0.5 percent, as its operating expenses jumped 23 percent. Amazon has been spending heavily to expand internationally and beef up its Web services business. I couldn’t help but wonder what these figures would look like in a pro forma basis. The investment in warehouses and digital technology could be a one time expense and is not likely to occur in the next quarter, so the net income must have definitely been close to what the analysts predicted.
Revenues in the current quarter are predicted to be $15.5 billion to $17.2 billion. Jeff Bezos says that Amazon’s top ten bestselling products last quarter were all either Kindles, accessories for Kindles, or digital content for Kindles, which suggests the transformation is steadily having an impact, even if it’s proving expensive.
REFERENCES:
http://www.bloomberg.com/news/2013-07-25/amazon-posts-surprise-loss-after-spending-on-warehouses.html
http://www.cnbc.com/id/100904121