Shares of Amazon slipped after hours, following the online retail giant's quarterly results, which showed a bigger-than-expected loss of $0.27 a share, while sales jumped 23 percent to $19.3 billion, as expected. Conway G. Gittens reports.
Amazon continues to bleed red ink. The online retail powerhouse lost 27 cents a share last quarter, which was almost double the 15 cent loss Wall Street was expecting. One reason why profits are hard to come by? Brick and mortar retailers are fighting for every dollar and bringing the battle to Amazon's home turf - the web, says Forrester Research analyst Sucharita Mulpuru: SOUNDBITE: SUCHARITA MULPURU, ANALYST, FORRESTER RESEARCH (ENGLISH) SAYING: "I think that their biggest competition at this point is a lot of the traditional retailers that have finally managed to really improve their operations are gaining more share back, and some of the examples of that are companies like Wal-Mart or Macy's and I think that that is where Amazon's biggest competition is." Revenues, though, were spot on, coming in at $19.34 billion. That's a 23 percent jump from the same time a year ago. But those sales come from what Mulpuru calls a race to the bottom: low prices and free shipping. But free shipping is like a noose around Amazon's neck. Despite upping the Prime membership fee, which includes free shipping and whole lot of other stuff, to 99 bucks last quarter - worldwide shipping costs surged almost 25 percent from a year ago, eclipsing that 23 percent jump in sales. SOUNDBITE: SUCHARITA MULPURU, ANALYST, FORRESTER RESEARCH (ENGLISH) SAYING: "I think one of the prevailing thesis in the financial industry is that Amazon Prime is hugely lucrative for Amazon, and I actually have an argument and have an analysis that Amazon Prime is actually very unprofitable for Amazon, and they have backed themselves into a corner with a very, very expensive offer that they have promised customers, and it is going to be increasingly difficult for them to offer two-day shipping to more and more customers for more and more of their orders without losing money." Amazon is also spending money on its digital media business, as well as the new Kindle Fire phone, which has largely been panned in the press. And its CFO says price cuts to stay competitive on the cloud "impacted Q2 results in a meaningful way." At one point, shares slumped below $320 in after-hours trade, a roughly 11 percent fall from their $358 closing price. BGC analyst Colin Gillis quickly points out that shares tend to sell-off when Amazon reports, but do bounce back. Last time Amazon posted results the stock dropped 12 percent in the next two sessions, but recovered that loss in about 2-1/2 months as investors bet in favor of Amazon's long-term strategy.