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  HOME | Business & Economy (Click here for more)

Amazon Suffers Setback, Fails to Meet Expectations despite Strong Investment

NEW YORK – E-commerce giant Amazon’s quarterly profits dropped for the first time in two years, results released Thursday showed.

The company founded by Jeff Bezos, which is making a strong investment in incorporating changes in its package transport infrastructure, announced that its profits during July-September 2019 were $2.13 billion, compared to $2.88 billion during the same period in 2018.

This represents a 26 percent decline in earnings, reflecting a fall in earnings per share from $5.75 to $4.23 in the recent quarter, and below the $4.59 forecast by experts.

The investors clearly expressed their discontent as the results were released after the closing bell at Wall Street, and stocks plunged by about 9 percent.

According to analysts, Amazon’s profits were expected to fall but not as much as they have, given its huge investments in changing its transport structure, by developing its own rather than hiring the services of independent companies.

In addition, it has been accelerating the delivery time on its Prime service, from two days to a single day, as it gears up for its busiest season from Thanksgiving at the end of November to Christmas.

“We are ramping up to make our 25th holiday season the best ever for Prime customers – with millions of products available for free one-day delivery,” Amazon chief executive Bezos said in a statement.

The founder and CEO of the company sought to highlight the positive aspects of its new transport infrastructure, which in addition to faster delivery, would result in lower greenhouse gas emissions, as distribution points will be closer to households.

On the other hand, Amazon announced earnings of $8.32 billion for the first nine months of 2019, which is 18.1 percent more than that recorded over the same period last year, backed by a 20 percent year-on-year increase in sales to $193.09 billion.

“They (clients) are buying more often, and they are buying more products,” the company’s finance chief Brian Olavsky told reporters by telephone.

In the recent quarterly results, Amazon included sales from “Prime Day,” which the company described as the largest shopping event in its history, surpassing “Black Friday” and “Cyber Monday” combined, with a sale of more than 175 million items in 48 hours.

Even then, the company announced its forecasts for the last quarter of the year, with estimated sales of $80-86.5 billion, notably lower than the $87.4 projected by analysts.

Moreover, the last quarter’s figures for Amazon’s cloud service, Amazon Web Services (AWS), failed to reach the $9.1 billion predicted by experts, and remained at $9 billion.

Over the last four years, AWS has been the source of most of Amazon’s operating revenue, so a slowdown in its growth could lead to lower profits in the future.

 

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