Investors have long grown accustomed to Amazon reporting stellar quarterly earnings. The world's largest online retailer has experienced torrid growth over the past decade as a result of its obsession with achieving business cost reductions and careful investment into emergent technologies.Given its history of impressing shareholders, that the Seattle, Washington-based company reported earnings this week that missed analysts' expectations was all the more surprising. Amazon said third quarter sales jumped by 44 percent to $10.88 billion, but even such a significant jump could not allay concerns pertaining to the company's continued investment into its distribution facilities and recently announced Fire tablet.
Amazon has historically had a thin profit margin as the company has consistently invested in the latest and most innovative technologies on its seemingly insatiable drive to increase efficiency. While past investments have unequivocally paid off, a chorus of analysts waved a red flag at the retail giant's latest earnings, Reuters reports.
The disappointing earnings prompted analysts at six prominent brokerages - including Bank of America Merrill Lynch, J.P. Morgan Securities and Barclays – to lower their price target on the company's stock, according to the news agency.
"Fulfillment spending was higher than expected as the company works to expand the number of fulfillment centers and adds selection," Evercore Partners analyst Ken Sena said in a note to investors.
Amazon's success has largely come as a result of chief executive Jeff Bezos' business philosophy, experts say. Bezos transformed the company from a big player to an international conglomerate by taking big risks that produced big payoffs. Bezos hired supply chain and logistics experts to overhaul the company's sweeping distribution network, overhauled strategic sourcing and stressed managers to achieve manufacturing cost reductions, among other initiatives.
Nevertheless, investors and shareholders are notoriously fickle, and a growing chorus of critics said they were worried by the company's drop in operating income. Amazon reported operating income hit $79 million in the quarter, which was down significantly from the $268 million it reported in the third quarter of 2010.
Moreover, net income plummeted 73 percent to $63 million compared to $231 million in 2010, further stoking the flame of concern among the business set.
For its part, Amazon said it expects exceptionally high demand for its new Fire tablet offering. Bezos also asserted the company is aggressively expanding as it works to increase efficiency and plans to build 17 new distribution facilities this year.
Post A Comment:
0 comments so far,add yours