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 The world's largest online retailer faced lofty expectations going
into one of the most heavily competitive holiday seasons in years,
with retailers vying to out-do each other with steep discounts. It
was a contest that many retail industry executives have blamed on
Amazon.
The Seattle-based company, which has spent freely to forge new
markets in cloud computing and digital media, is experiencing slower
growth at home after years of rip-roaring expansion, and its
international business continues to underperform.
Amazon expects operating results for the current quarter to range
from a $200 million loss to a $200 million profit, compared with a
$181 million profit a year ago.
To cover rising fuel and transport costs, the company is considering
a $20 to $40 increase in the annual $79 fee it charges users of its
"Prime" two-day shipping and online media service, considered
instrumental to driving online purchases of both goods and digital
media.
Amazon has been trying to sustain its pace of growth by investing
heavily in retail and distribution networks across the globe, while
expanding into the technology realm with Kindle digital devices,
cloud computing services and online media.
That has taken a toll on its bottom line. With revenue growth
slowing as Amazon achieves unprecedented scale, analysts said
investors may be getting impatient.
"Amazon's gotten so many hall passes on earnings," said Colin
Gillis, an analyst at BGC Financial, adding that pressure on the
company to produce profit is now rising. "Perhaps the market
expectations for them to deliver income, as their revenue growth
slows" is increasing, said Gillis.
Amazon now has to tread carefully as it ponders a Prime fee-hike,
which could boost revenue and earnings but also risks alienating
tens of millions of existing customers or discouraging new ones.
Executives said no decision had been made but stressed that they had
not touched the fees since Prime's inception.
"When we launched Prime nine years ago, one of the things we hoped
for was customers do a lot more cross-shopping, that they would buy
more from us," CFO Tom Szkutak told analysts on a post-results
conference call.
"And we've seen that trend."
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PATIENCE A VIRTUE?
Amazon's growth beyond the United States has struggled amid economic
malaise in Europe and parts of Asia. At home, the company is still
faring better than its fellow retailers, in part because of a
steadily improving distribution system anchored by a growing web of
giant warehouses, that helps keep costs down.
Retailers in general faced the most promotional 2013 holiday season
since the recession, trying to outdo one another with deep discounts
to lure shoppers. That has pressured traditional retail chains such
as Sears and Kmart.
Also, Amazon's net shipping costs in the period jumped 19 percent to
$1.21 billion.
The company more than doubled net income to $239 million, or 51
cents per share. Analysts had expected 66 cents, on average.
Net sales grew 20 percent to $25.6 billion in the fourth quarter,
versus expectations for just above $26 billion and slowing from the
24 percent of the previous three months.
North American net sales in particular grew 26 percent to $15.3
billion, from 30 percent or more in the past two quarters.
International sales rose just 13 percent, below Wall Street
expectations.
The company forecast revenue of $18.2 billion to $19.9 billion in
the first quarter, a conservative outlook relative to Wall Street's
expectation for about $19.7 billion in sales.
Shares in Amazon were down to $382.50, from a close of $403.01 on
the Nasdaq. The stock was down more than 10 percent at one point in
extended trading.
(Reporting by Bill Rigby and Edwin Chan;
editing by Andrew Hay)
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