PracticePeople In PracticeAmazon chief confident of profitability

Amazon chief confident of profitability

Online retailer Amazon.com claims to be on track to make its first ever profit in the fourth quarter of this year, after reporting its 17th consecutive quarterly loss this week.

But with its sales growth slowing due to the economic downturn, industry watchers remained cautious about whether the company will make it into the black any time in the near future.

The just-released second-quarter figures beat expectations, however. Sales rose 16% to $668m (Pounds 469m), from $578m (Pounds 406m). Pro forma operating loss was $58m (Pounds 40m), or 16 cents a share, compared with $116m (Pounds 81m), or 33 cents a share, a year ago.

A consensus of analysts polled by First Call had expected Amazon to lose 22 cents a share on sales of between $675m (Pounds 474m) and $685m (Pounds 481m).

The loss would have been greater if it had used ‘official’ GAAP (generally accepted accounting principles) instead of pro forma. Using GAAP, the net loss would have been $168m (Pounds 118m), or 47 cents per share, down from $317m (Pounds 222m), or 91 cents per share, a year ago, representing a 47% improvement.

Looking forward, chief executive Jeff Bezos was confident that, despite the slowing global economy, Amazon will finally see black ink at the end of the year. ‘We have been focusing on operating efficiency driving towards profitability and we are very pleased with the bottom line progress,’ he said.

Bezos claimed that the company’s US operation was already profitable and that all the losses were in its fast-growing international businesses.

The most sceptical of analysts still believe that Amazon is heading for bankruptcy rather than profitability, but Bezos said that the company has $608m (Pounds 427m) in cash which does not include the $100m (Pounds 70m) equity investment pledged by AOL Time Warner on Monday.

In return for that new investment, the online retailer will develop an e-tail platform for AOL, and will promote AOL as its exclusive internet service provider.

Lauren Cooks Levitan, an analyst at Robertson Stephens, is less worried about the threat of bankruptcy than the slowing growth at Amazon. “The continued lacklustre performance of the core business is a concern,” she said.

Links

Amazon reports record Christmas sales

  • This article first appeared on vnunet.com

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