NEW YORK: Amazon.com Inc forecast holiday season sales and profit that missed Wall Street targets, projecting revenue growth that would be the slowest in years, sending shares of the world’s largest online retailer down 8 per cent in after-hours trade.
Amazon’s third-quarter sales lagged estimates as well. Analysts said international results were disappointing and online competition was increasing. The company blamed accounting changes and cautioned that it was being conservative with its outlook.
For years, Amazon has made expensive bets on new technology and programs, like its $13.7 billion acquisition of Whole Foods in 2017 to storm the US grocery industry. That has resulted in rollercoaster profits in the past, but revenue has largely grown at a breakneck pace as consumers shifted shopping online and away from brick-and-mortar stores.
“Weak revenue growth stuck out like a sore thumb,” said George Salmon, analyst at Hargreaves Lansdown. “And when you’re trading on 70 times expected earnings, it doesn’t take much to jolt the share price.”
Amazon’s more subdued expectations for this year’s holiday shopping season, which runs from the US Thanksgiving holiday in late November through New Year’s, was a particular surprise. It forecast that fourth-quarter sales will rise between 10 per cent and 20 per cent, or up to $72.5 billion, while analysts were expecting $73.9 billion, according to Refinitiv data.
That would be Amazon’s lowest quarterly sales growth since at least the start of 2016. In the last four quarters, sales increased between 29 per cent and 43 per cent.
Brian Olsavsky, Amazon’s chief financial officer, said no fundamentals had changed, just some holiday timing in India and accounting differences.
“We’re expecting a strong holiday season, so there’s no message in our forward guidance against that,” he said on a conference call with media. “We have everything ready to roll.”
The company moved the recording of $300 million in Prime subscription revenue from the fourth quarter to earlier periods in the year, he said. In addition, Amazon faces a tougher year-over-year comparison because the Whole Foods deal closed in the third quarter of 2017, and the different timing of the holiday Diwali affected sales patterns, he said.
“Amazon saw a meaningful slowdown in their international division. They had been hitting on all cylinders so this is something investors weren’t ready for,” Chaim Siegel, analyst at Elazar Advisors, said.
Amazon forecast fourth-quarter operating income between $2.1 billion and $3.6 billion, below the $3.87 billion expected by analysts, according to FactSet. Neil Saunders, managing director of GlobalData Retail, said the results reflected a shifting landscape with retailers holding their own against Amazon.
“Others are now getting better at nibbling away at its dominance,” he said, citing Walmart, Target and Macy’s. — Reuters
Oman Observer is now on the WhatsApp channel. Click here
