Amazon shares slip after reporting small loss

The company shows a 22% revenue gain, but it reports a small loss for its second quarter. As always, Amazon's focus is on delivering for customers with a slim profit margin.

By Charley Blaine Jul 25, 2013 1:52PM
MSN Money staff graphicUpdated: 7:18 p.m. ET

Amazon.com (AMZN) reported a loss of 2 cents a share Thursday afternoon, missing forecasts of 5 cents a share.  Revenue of $15.7 billion was up 22% from a year ago but missed the consensus estimate of $15.73 billion.
 
Shares were off as much as 5.7% immediately after the results were released, but the loss has been trimmed by more than half. The shares were down $8.39, or 2.8%, to $295.01 at 5:35 p.m. ET after hours from a regular close of $303.40.

Amazon's 2 cents-a-share loss translated into a loss of $7 million, down from a profit of 7 million a year ago.

At the same time, Starbucks (SBUX) shares rose smartly after hours as sales and earnings beat Street estimates. But travel-site Expedia (EXPE) shares were slumping after hours after reporting earnings that badly missed estimates.

During Amazon's analyst call, Chief Financial Officer Tom Szkutak said one reason for the earnings miss was new spending on digital video content ahead of the holiday season.

A rising dollar during the quarter trimmed Amazon's reported revenue by $392 million. Had the dollar not moved higher, the company said, it would have reported a 25% sales gain.

The question about Amazon's earnings was not if CEO Jeff Bezos can turn the Street's opinion on his company around.

Wall Street has loved the company. Based on Thursday's close, the shares are up nearly 21% this year alone. They've risen an astounding 762% since its 2008 bottom of $35.03.

The question going into the report was whether the earnings report will signal that Amazon is getting close to finishing out a major round of investments in warehousing and delivery systems, not to mention a new initiative in original video content. That could mean higher profits in the near future.

The consensus estimate going into the report suggested that many analysts think earnings will grow. Afterwards, they weren't sure when the earnings growth will start. Part of the issue is that level of new investment, including the expected video investment.

Capital spending in the last four quarters was $14.4 billion, equivalent to 91% of second-quarter revenue. And it doesn't look like it will shrink in the third or fourth quarters.

Meanwhile, Europe may be injecting a new area of concern. North American sales were up 29.6% from a year ago. International sales were up only 12.7%.

Amazon.com projected third-quarter revenue of $15.45 billion to $17.15 billion. That's a growth range of 12% to 24% over a year ago. It expects the quarter to show an operating loss of $440 million and $65 million. In the year ago quarter, it lost $28 million.

Amazon is one of those wonderfully maddening companies that doesn't really care about the classic Wall Street view of what a company should do: Build earnings per share and let the stock rise as a result.

Amazon has long been embarked on a mission to bring goods and service to consumers at the lowest possible prices. As long as it can earn even a penny in profit on any transaction, all is well. In other words, it's trying to out-Wal-Mart Wal-Mart (WMT).

The mission has created a company that's likely to show sales of $75 billion in 2013 and $90.92 billion in 2014.

It has gone from selling books to selling just about everything it can get its hands on, including fresh produce, all delivered from a network of warehouses that is expanding to get closer and closer to end customers.

The business has forced hundreds of of bookshops to close their doors. It killed the Borders chain; it has damaged Barnes & Noble (BKS) to the point that many question if it can survive.

It has also expanded into e-readers and the Kindle Fire tablet, which competes against Apple's (AAPL) iPad.

But Amazon has become an electronic powerhouse. Electronics and other merchandise now represent about 65% sales globally.

Starbucks up, Expedia down
Meanwhile, Starbucks reported a 28% increase in earnings to 55 cents a share, up from 43 cents a share a year ago. The Street had expected 53 cents. Revenue was up 13.3% to $3.74 billion, ahead of the Street estimate of $3.72 billion.

Shares rose $4.08, or 6% after hours to $72.25. They had climbed $1.56 to $68.17 in regular trading. The after-hours price would be a record if it holds on Friday.

But Expedia shares were down $15.17, or 23.4%, to $49.83. The regular close of $65 was up $1.22. The company said it earned 64 cents a share down from 89 cents a year ago and missing the Street estimate of 81 cents by 17 cents. It reported a 16% revenue gain to $1.21 billion, but that missed the consensus estimate of $1.26 billion.

Zynga (ZNGA) shares were down 14.7% to $2.99 in after-hours trading on Thursday. The company warned of difficult times ahead and said it would drop plans to offer real-money games.

The stock market ended the day little changed.

The Dow Jones industrials ($INDU) added 13 points to 15,556. The Standard & Poor's 500 Index ($INX) rose 4 points to 1,690, about 5 points beneath its record close of 1,695, set last week. The Nasdaq Composite Index ($COMPX) jumped 25 points to 3,605, its second-highest close of the year.

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12Comments
Jul 25, 2013 5:00PM
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Amazon the destroyer of local business is a parasite that does more harm than good
Jul 25, 2013 4:23PM
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Amazons business is so large it can tweak it's pricing a very tiny amount and turn a small loss into massive profits. I wouldn't weep for Amazon.
Jul 25, 2013 4:55PM
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Amazon is so funny. They want to take over the world and they still don't make any money. 
Jul 25, 2013 5:06PM
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This is actually a bit refreshing.  For the last 4 years, we've seen companies make more profit on less revenues - a sure sign they are cutting their way to profits.  Now we get a major player who is reporting the opposite.  Maybe this is a good sign.
Jul 25, 2013 5:05PM
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I "LOVE"  Amazon ; They  ARE   the  BEST  !
Jul 25, 2013 4:16PM
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Sales tax effect.  Amazon agreed to pay state sales tax on internet sales and now competes with a 5-10% premium.  Ebay and Overstock here we come.
Jul 25, 2013 4:36PM
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I think it is a great company and like the products, the prices, the variety, and the delivery time.  I went to Macy's (which I also like) and searched for some trousers, but in all of its stores there were none in the sizes I was looking for. Amazon had them and delivered them two days later and $12 a pair cheaper. I like the stock too.  One would think that Macy's buyers were a bit more savvy about shoppers' needs than they seem to be.  This is not the first time. 
Jul 25, 2013 4:42PM
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News FLASH... Amazon has no balls or ethics. They wait until after the markets are closed so a bad day with a modest loss can be bolstered by Ben Bernanke and his Fiat Federal Reserve at the last minute to end the day in the black. You're a crappy company Amazon... we don't need the likes of you in America. If you want to pump cheap Chinese drop-shipped crap to cheap Gen X & Y losers trying to get out of Sales Tax... MOVE TO CHINA AND CORRUPT THEIR ECONOMY.

 

Is ANYONE amazed that Charley's article came out THREE HOURS AGO but it only appeared on the actual site about 25 minutes ago? CROOKS.

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