Amazon’s shrinking profit is result of reinvesting in business
As expected, Amazon.com
posted a sharp drop in its second-quarter profit Thursday after reinvesting in the business.
The Internet retailer reported a razor-thin profit of $7 million, or a penny a share, down from $191 million a year ago.
Sales rose 29 percent to $12.83 billion.
Analysts expected a per-share profit of a penny on $12.92 billion in sales.
Thursday’s results mark the sixth straight quarter in which Amazon’s profit has declined on a year-over-year basis.
Seattle-based Amazon is spending heavily to build out its global distribution network. It added 30 new warehouses in the past two years and plans an additional 13 this year, putting its worldwide total at more than 80.
Amazon reported 69,100 employees at the end of June, up from 65,600 three months earlier.
Also, profits came under pressure from Amazon’s $775 million purchase of warehouse robotics company Kiva Systems. The purchase, finalized in May, is the second-largest in Amazon’s history, behind its $1.2 billion deal for Zappos.com
Amazon’s stock fell about $2, less than 1 percent, to $218 in after-hours trading following the earnings report.
“There was nothing that made me say, ‘Uh-oh, there’s a problem.’ It looked about like we expected,” said Jason Moser, senior analyst at The Motley Fool, an equity-research and asset-management firm.
“They’re spending a lot to set themselves up for long-term success,” he said. “Once they’re done with that, I think we’ll see margins dramatically improve.”
A concern for analysts is Amazon’s looming sales-tax requirements in California, Pennsylvania and other states.
Amazon began collecting sales tax in Texas this month after reaching a deal with the state’s comptroller. It also will begin charging customers sales tax in Pennsylvania on Sept. 1 and California on Sept. 15.
Besides Texas, Amazon collects sales tax in Kansas, Kentucky, New York, North Dakota and Washington.
Under a decade-old U.S. Supreme Court ruling, Internet retailers don’t have to collect sales tax in states where they lack a physical presence, but Congress is considering legislation that allows states to force them to do so.
Amazon, after fighting new sales-tax requirements, has been making deals with states where it has or soon will have distribution centers to begin charging taxes in the future.
Amazon consequently has proposed building 15 to 20 new distribution centers, costing at least $50 million each, according to an estimate by Needham & Co. analyst Kerry Rice.
Sales of digital goods like Kindle e-books, music and movies rose 13 percent to $4.12 billion while sales of electronics and other items rose 38 percent to $8.16 billion.
The Seattle-based company said it expects third-quarter revenue to grow between 19 percent and 31 percent from a year ago. That amounts to sales of $12.9 billion to $14.3 billion. The midpoint is short of the $14.1 billion expected by analysts.
It also forecast a third-quarter operating loss of $50 million to $350 million.
Chief Financial Officer Tom Szkutak said the projected loss was due in part to investment in the company’s fulfillment centers ahead of the all-important holiday quarter.
The Associated Press contributed to this report.