Friday 20 January 2017

Amazon promises profit as holiday shopping season forecast to grow

Spencer Soper

Published 25/10/2015 | 02:30

Amazon boss Jeff Bezos has assured investors that his company would make a profit in its busy holiday shopping season
Amazon boss Jeff Bezos has assured investors that his company would make a profit in its busy holiday shopping season

Amazon boss Jeff Bezos did something last week that he hasn't since 2010 - he assured investors that his company would make a profit in its busy holiday shopping season.

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Amazon has a history of wide- ranging forecasts - $1bn wide - on earnings that straddle the line between making money and losing cash. The e-commerce giant sells goods online, builds tablets for reading e-books, makes original movies, delivers food from restaurants and operates data centres used by Netflix and Pinterest.

Investors cheer the Bezos who tramples brick-and-mortar retailers by changing the way people shop. They tend to punish the Bezos who risks their money on things like a smartphone to challenge the iPhone. Bezos made a commitment last week to make them richer, forecasting Q4 operating income from $80m to $1.28bn. It's still a broad range, but the low- and high-ends are on the right side of zero. And investors made Bezos richer by sending Amazon shares up as much as 13pc in extended trading after the earnings were released.

"The whole narrative about the company not being able to turn a profit is slowly starting to fade away," said RJ Hottovy, analyst at Morningstar. "All of the components are working together now."

Amazon had a lot of upside. Its first Prime Day sales promotion in July boosted its global revenue growth rate by 2pc, CFO Brian Olsavsky said. Its cloud computing division, Amazon Web Services, beat expectations with sales gaining 78pc. And importantly, revenue rose faster than expenses.

Beyond the numbers, there are signs that Amazon's profitability in the US will soon be mimicked overseas as it exports the same services that have wooed America. And they emphasised innovation in an earnings call with investors.

Amazon Web Services has introduced 530 new features so far this year, more than all of last year, Olsavsky said. And the company had 30,000 robots in its warehouses at the end of the quarter, double the number from a year earlier, he said, to emphasise that Amazon isn't letting up on innovation even though it's watching spending.

"Innovation and investment will continue and could be lumpy at times," he said. "The cost reductions will be a constant presence."

Bloomberg

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