Wednesday, July 27, 2011

[News] UPDATE: Amazon Profit Down as spending exceeds the growth in sales Inc. 's (AMZN) second-quarter earnings fell 7.7% as the No. 1 Internet retail sales continued to spend at a pace that exceeded even the heady revenue growth.

However, the decrease of the gain was not as strong as feared, and sat back to investors a 51% sales growth. The shares rose 6.5% to $ 228.15 after hours. The stock hit its latest high last Wednesday and had fallen by 2.7% since then until closing.

"It was a great revenue growth," BGC Partners said Colin Gillis, an analyst report from Amazon. "That is all that is focusing on."

Amazon said it expects that $ 10.3 billion to $ 11.1 billion in revenue in the current quarter. Analysts on average project $ 10.35 billion, according to a survey by Thomson Reuters. Amazon also predicted that revenues would fall by 93% in the third quarter.

Amazon has been investing aggressively in new technologies and distribution to the detriment of the bottom line in recent quarters.

During a conference call with the media, Amazon CFO Tom Szkutak said the company currently has 15 fulfillment centers, and "we expect it to grow [by] a little more at least" the end of the year.

In the fourth quarter, operating expenses rose 54%. It was the biggest percentage gain in at least one year and came on top of a 40% increase on the previous year.

Distribution network the company was the source of significant cost increases, the costs associated with compliance increase of $ 941 million from $ 582 million. Marketing-related expenses rose to $ 341 million $ 211 million.

Meanwhile, Amazon's operating margin, a very visible measure, fell to 2% from 3.3% in the previous period.

"Their margins are falling," said Gillis. "Given the valuation [Amazon] is trading cases, to produce profits so miserable it is difficult to justify."

Chief executive Jeff Bezos, has defended the strategy of large investments, and said it taken directly to the free cash flow. In the fourth quarter, free cash flow for the last 12 months ended June 30 fell 8% over the same period last year and 3.7% for the same period of March 31.

In the last period, Amazon made a profit of $ 191 million, or 41 cents a share, from $ 207 million, or 45 cents per share, in the same quarter last year. Analysts predicted earnings of 35 cents per share.

Net sales increased 51% to $ 9.91 billion. The growth was 44% excluding the effect of currency translation. In April, the company expects $ 8.85-9.65 billion dollars, better than analysts expected at the time.

Gross margin rose to 26.8% from 24.5%.

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