Amazon predicted a weak quarter, and its predictions came true.
The retailer said Thursday that it swung to a quarterly loss for the first time in four years. The earnings report, issued after the market closed, immediately sent Amazon shares down 9 percent before recovering.
Amazon.com Inc. posted a loss of $274 million, or 60 cents per share, in the July-September period, much of it because of a large loss on its investment in the daily deals site LivingSocial. That’s down from earnings of $63 million, or 14 cents per share, a year earlier.
It was the first net income loss in 18 quarters. Amazon earned 14 cents a share in the third quarter of 2011.
The company had warned that a loss was coming, saying it expected to lose $50 million to $350 million in the quarter. Its operating loss was $28 million. Profit in the third quarter of 2011 was $79 million.
“Our approach is to work hard to charge less,” Jeff Bezos, founder and chief executive, said in a statement. “Sell devices near break-even and you can pack a lot of sophisticated hardware into a very low price point.”
Earnings disappointments are causing carnage among some of Amazon’s land-based electronics competitors, but Amazon’s many fans will probably be unfazed.
Revenue was $13.8 billion, a little less than the $13.9 billion that analysts expected. Amazon had predicted that revenue would be $12.9 billion to $14.3 billion. In 2011, third-quarter revenue was $10.9 billion.
Amazon’s strategy of selling as cheaply as it can may be tough on its margins but it’s tougher on competitors. Radio Shack missed its earnings forecasts this week, prompting doubts about its viability. Best Buy fell 10 percent as it warned that third-quarter profit would be “significantly lower.”
The third quarter is a mere preamble to the all-important fourth quarter, where Wall Street expects significant revenue growth for Amazon powered by new Kindle tablets and associated downloads. New warehouses are coming, speeding delivery of physical goods to customers that will, in theory and no doubt in practice, encourage them to order more. Amazon, the dominant e-commerce company, has been able to grow faster than the overall industry.
Still, there are Amazon skeptics. Colin Gillis of BCG Partners published a haiku before the earnings report that went like this: “So much revenue, and with all those shipping costs, so little profit.” What his verse lacked as poetry it made up as cogent criticism.
Amazon’s operating margins have been about 2 percent or less for the past year.The Associated Press contributed to this report.