February 1, 2012

Amazon’s earnings fall hugely … again … Will investors rebel?


Amazon.com released its fourth quarter numbers late yesterday, revealing that after a third quarter in which its earnings had a huge drop, its earnings for the quarter again took a huge tumble. As Joan E. Solsman details in a Wall Street Journal report, earnings fell a whopping 57%, on net sales that were nonetheless themselves up a whopping 35% to $17.43 billion.

But as David Streitfeld notes in a New York Times report, the whopping gain was “nearly a billion short of what analysts had been expecting,” and stocks dropped immediately by as much as $18 per share, even though Amazon waited until after hours to make the announcement.

It’s the pattern that’s become standard for Amazon: every quarter sales go up and losses do, too. But the pattern is starting to worry investors in the publicly-held company, says Solsman’s WSJ report. According to her, “investors have grown increasingly exasperated by how long Amazon opts to sacrifice near-term profit for its goals. In October, the online retailing leader unnerved investors when it reported a 73% plunge in profit for the third quarter and issued conservative bottom-line targets for the latest period.” And she notes that despite what Amazon claims have been amazing sales for the Kindle Fire, that has been a “margin pressure point as well,” because “the Fire’s profit potential is uncertain, with market researcher IHS estimates the Kindle Fire costs as much to make as its selling price.”

But as Streitfeld notes, there could be other reasons behind this quarter’s decline:

Maybe the Kindle isn’t selling as well as people think, maybe it was a brittle economy, and maybe a few customers stayed away because of bad publicity over a comparison shopping app.

… Perhaps it was the bad publicity from December, when Amazon.com created an uproar by encouraging customers to use a price-checking app on Main Street and in the malls, and then return to Amazon for a better deal. Booksellers, who have long felt themselves in the retailer’s crosshairs, were particularly offended. A tentative “buy local” movement sprang up.

Whatever the case, brace yourselves, investors: Both reporters say Amazon warned it might be posting another loss in the current quarter … the kind of warning that usually means, well, you can count on it.



Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.