Amazon misses revenue, profit expectations in Q2

IDG News Service |  Business

Amazon.com Inc. missed Wall Street analysts' revenue and profit expectations in its second quarter, ended June 30.

Amazon reported revenue of US$1.39 billion, up 26 percent from 2003's second quarter but short of the $1.44 billion consensus expectation from analysts polled by Thomson First Call.

Net income came in at $76 million, or $0.18 per share, missing the consensus expectation by a penny. In last year's second quarter, Amazon reported a net loss of $43 million, or $0.11 per share.

The company issued the results in a statement Thursday after the close of the financial markets in New York. The company's stock (AMZN) closed up 2.37 percent on the Nasdaq, at $45.82, but fell 4.63 percent to $43.70 in after-hours trading.

Despite missing expectations, Amazon executives were upbeat during a conference call to discuss the results. "This was another successful quarter for Amazon.com as we continue to execute on our strategy of low prices, broad selection and convenience to our customers," said Tom Szkutak, senior vice president and chief financial officer.

Use of the company's free shipping offers reached a "record high" in the quarter and Amazon plans to keep the program in place indefinitely because it considers it an effective marketing tool, although it acknowledged that it is expensive, the company said in the statement.

Amazon sells a wide variety of retail products. It offers free shipping on sales that exceed certain amounts at the Web sites it runs in the U.S., the U.K., Canada, Japan, Germany and France. This means that the Amazon sites offer free delivery on orders that meet specific amount requirements, as long as the products are being delivered to the country where that site is located, an Amazon spokeswoman explained via e-mail. Shipping-related costs hit $119 million, up from $106 million in 2003's second quarter.

The Amazon spokeswoman declined to comment on analysts' expectations, citing a company policy, but pointed out that individual earnings per share estimates ranged between $0.18 and $0.21.

Technology and content costs also went up, because the company is adding IT professionals such as computer scientists and software engineers to improve its Web sites' customer experience and processes. "We continue to be successful in hiring top computer scientists and software engineers on an accelerated basis. We believe this is the right thing to do for the customer experience and long-term shareholder value," Szkutak said. General and administrative costs also rose, particularly legal fees, "as we continue to vigorously defend legal matters," Szkutak said. Costs in technology and content and in administration are expected to continue increasing in the current quarter and beyond, he said.

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