Amazon stock takes a big hit after a bigger-than-expected loss
Amazon.com Inc. stock tumbled in after-hours trading after the company reported a third-quarter loss worse than analysts expected.
The world’s largest online retailer attributed the loss to increased spending on new technology and building distribution centers, as well as taking an accounting charge for its investment in online deals company Living Social.
Amazon shares fell $5.57, or 2.4%, to close at $222.92 before the company released its results. At one point in after-hours trading, Amazon shares fell an additional $2.48.
The Seattle company posted a loss of $274 million, or 60 cents a share, much more than the 8-cents-a-share loss that analysts in a Thomson Reuters survey had anticipated. In last year’s third quarter, Amazon earned $63 million, or 14 cents a share.
Sales for the quarter rose 27% to $13.8 billion. Analysts had expected $13.9 billion.
Looking ahead, Amazon said fourth-quarter results that include the crucial holiday shopping season could range from a $490-million loss to a $310-million profit.
During a conference call with analysts Thursday, Amazon Chief Financial Officer Tom Szkutakattributed the third-quarter loss to increased investments in developing a presence overseas, adding more video content and building out the company’s offerings of Kindle e-readers and tablets. Amazon is opening 19 distribution centers across the U.S. before the holiday season and hiring 50,000 temporary workers.
“You shouldn’t be expecting high returns of investment capital in the short term,” Szkutak said, “but it’s very exciting in a long-term perspective.”
The company was also hurt by its investment in Living Social, which is losing money. Amazon invested $175 million in Living Social in 2010.
Amazon also has been pouring money into developing a wider selection of Kindles. Last month the company introduced seven new Kindle models to a lineup that ranges from $69 for the basic reader to $599 for the Kindle Fire HD. They compete with Apple Inc.'s iPad and Google Inc.'s Nexus tablet, but Amazon acknowledged the Kindle line is unprofitable.
The ultimate goal is to sell apps, movies and e-books, which have higher profit margins, the company has said.
“Our approach is to work hard to charge less,” Amazon founder and Chief Executive Jeff Bezos said in a statement Thursday. “Sell devices near break even, and you can pack a lot of sophisticated hardware into a very low price point.”
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