Amazon’s Prime Day boost couldn’t save it from disappointing sales
The boost Amazon received from Prime Day wasn’t high enough to vault the retail giant over Wall Street’s expectations.
Amazon’s revenue jumped 29 percent to $56.6 billion, helped by a $2 billion take from Prime Day, according to an estimate from RBC Capital Markets. But that still fell shy of the $57.1 billion analysts had predicted. Amazon said revenue was hurt by foreign exchange rate changes.
Investors weren’t looking for excuses, with shares falling more than 5 percent to $1,688.01 in after-hours trading.
The world’s largest e-commerce site on Thursday reported third-quarter profit of $2.9 billion, up from $256 million a year ago.
Amazon’s third-quarter report arrives a few weeks before the holiday shopping season, when Amazon and other retailers enjoy a weeks-long spike in sales. The upcoming season is expected to benefit from a strong US economy and low unemployment, with the National Retail Federation predicting consumer spending during the holidays rising 4 percent.
There may be further wrinkles this holiday season.
In a bid to siphon shoppers away from Amazon, bothand this week stepped up their free two-day shipping programs, which are available for customers without a membership fee. Amazon already offers free shipping on millions of products if a customer buys at least $25 of goods, but only offers two-day shipping at no additional cost to its Prime members.
Those retail rivals made that change a few months after Amazon decided to, which could hamper Amazon’s sales. Amazon has said that hasn’t happened, with finance chief Brian Olsavsky that Prime renewals are “looking really, really good” despite the price hike.
The moves underscore the increasingly competitive landscape as retailers battle it out for your business. As Amazon continues to surge thanks to stronger online sales, traditional retailers like Toys R Us and Sears have fallen into bankruptcy protection. Now, Walmart, Target and others are working harder to play catchup against Amazon to hold onto their customers.
Additionally, Amazon earlier this month said it will, with the change taking effect next Thursday.
About 350,000 US Amazon employees and seasonal workers will see their wages increased, but that boost isn’t expected to seriously crimp Amazon’s bottom line.
It will cost Amazon an extra $333 million to fund its higher salaries during the fourth quarter, according to Cowen, a financial research company. Even with that wage increase, Amazon is still expected to post a 31 percent rise in operating income from the year earlier to $3.3 billion.
While the pay boost won’t significantly harm Amazon’s financials, it will help the company quiet its critics, who have complained about its treatment of warehouse workers, while also allowing Amazon to draw in and retain more workers just ahead of the holidays during a tight labor market.
For the quarter, Amazon reported per-share earnings of $5.75, up from 52 cents a year earlier and easily beating Wall Street’s expectations of $3.14, according to Yahoo Finance..
Sales from Amazon’s main online stores rose 11 percent, while the Amazon Web Services cloud-computing unit reported a 46 percent increase in sales. The company’s burgeoning advertising business continued to show strength, with sales more than doubling in the quarter.
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