It’s in the nature of losses that they demand explanation. If you lost your friend’s car or aerial delivery drone, say, you’d have to tell them what happened and what you were going to do about it. You might even think about apologising.
Amazon’s losses in its third quarter to September 30th were $437m (£271m), and yet its results statement last night focussed instead on the very string of initiatives that hit the bottom line in the first place.
Investors could read all about the new Kindle Kids’ Book Creator and 3D Printed Products Store or the expansion of Amazon Fresh to Brooklyn and Amazon Web Services to Frankfurt, but one imagines they may have been more concerned with the harder facts quickly unloaded at the beginning of the statement.
Amazon’s third quarter net loss of $437m was over ten times what it was in the same period last year ($41m) and its projections for fourth quarter revenues were worse than expected, at $27.3bn to $30.3bn, against the average analyst’s forecast of $30.9bn. Although its revenues were up 20% to a staggering $20.6bn, even they were behind analysts’ expectations. It’s no wonder shares bombed to $284 in afterhours trading, losing 11% of their value in the space of a few hours.
The issue is precisely boss and founder Bezos’ continued obsession with revenues over profits.
Amazon’s strategy of going after razor-thin margins and unbridled expansion into more and more online (and offline) realms has helped turn it into the leviathan that it is, but the cost of all those drones and video game spectator sites adds up.
Shareholders have been complaining about Bezos’ start-up ethos of growth over profits for years now, but they’ve tolerated it. Eventually, though, they’ll want the balance to be tipped in favour of the bottom line, and by the looks of it they might want it sooner rather than later.
Bezos was apparently untroubled. Chirpy, even. ‘As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever,’ he said, going on to name-drop Amazon’s Holiday Toy List and Kindle Voyage among other new launches.
‘And, if you order your gifts on AmazonSmile,’ he added, ‘we’ll donate a percentage of your purchase price to your favourite charity.’
For some reason, Bezos’ festive cheer didn’t rub off on investors. Can’t think why.
Amazon revenues do have a nice upward trend, but if you look at profit/loss...