Amazon misses sales estimates

AmazonE-commerce giant, Amazon has seen fourth quarter sales hit $43.7 billion, missing analyst estimates.

Amazon shares fell 3.7 per cent as the company forecast a bigger-than-expected fall in operating income for the current quarter.

Operating cash flow increased 38 per cent to $16.4 billion for the trailing twelve months, compared with $11.9 billion for the trailing twelve months ended December 31, 2015.

Net sales increased 22 per cent to $43.7 billion in the fourth quarter, compared with $35.7 billion in fourth quarter 2015. Excluding the $558 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 24 per cent compared with fourth quarter 2015.

Operating income increased 13 per cent to $1.3 billion in the fourth quarter, compared with operating income of $1.1 billion in fourth quarter 2015.

Net income was $749 million in the fourth quarter, or $1.54 per diluted share, compared with net income of $482 million, or $1.00 per diluted share, in fourth quarter 2015.

In Amazon’s full year results for 2016, net sales increased 27 per cent to $136.0 billion, compared with $107.0 billion in 2015.

Net income was $2.4 billion, or $4.90 per diluted share, compared with net income of $596 million, or $1.25 per diluted share, in 2015.

Commenting on the e-commerce giant’s results, Anthony Riva, Analyst at GlobalData Retail, said while Amazon is usually a retailer that operates at full volume and “the noise of its sales growth a clarion call in an often muted retail sector”,  this quarter’s results show that volume seems to have been turned down a couple of notches.

“Amazon’s growth remains impressive, and is a long way above the retail sector overall, but by the high benchmark it has set, the latest numbers have a certain softness,” he said.

Some of the loss in momentum comes down to a more unfavorable exchange rate. On a constant currency basis, Amazon’s overall growth is a more respectable 24 per cent; while its international growth leaps to 23 per cent from 18 per cent, once the impact of the strong dollar is factored out.

“Even so, these upticks still leave a gap in growth compared to what Amazon delivered over the first three quarters of the fiscal.”

Riva also said part of the softness comes down to shipping related revenue, which grew by its slowest pace in over a year, which has placed a little downward pressure on the revenue line.

“More worryingly it means that shipping revenue from consumers is now strongly adrift from Amazon’s shipping costs,” he said.

In the final quarter, the former grew by 29 per cent, while the latter surged by 35 per cent to just over $5.6 billion.

“This is one of the reasons the company missed its profit forecasts, and why operating profit came in at 2.9 per cent of sales versus 3.1 per cent over the same period last year.”

With low cost and fast delivery fundamental drivers of Amazon’s appeal to consumers, Riva warned they are also its Achilles’ heel – and with Prime becoming more popular, and with a greater focus being put on speedier shipping times, he expressed concern that Amazon could see further profit erosion as it enters its new fiscal year.

“This view is supported by Amazon’s own guidance for the next quarter, which suggests profit will come in well below last year.”

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