Amazon growth rate worries Wall Street
Revenue hit by promotion and shipping costs
Amazon’s share price has fallen after the online retail giant announced fourth-quarter revenue below Wall Street’s forecasts, despite another strong period of sales growth.
With Amazon’s profits hit by investment in lower selling prices, increased marketing costs, and increased customer take-up of free shipping offers, analysts are concerned that the company will struggle to maintain its growth rate as competition increases.
Amazon also conceded that it will take a hit from the launch this week of a new free shipping offer in the US, Amazon Prime.
In the fourth quarter of 2004, net sales were $2.54bn, up by 31 per cent on the last three months of 2003. When exchange rates are factored in, net sales grew 26 per cent. Operating income was $162m in the fourth quarter, compared with $138m in the fourth quarter of 2003.
North America sales, including the US and Canada, grew 22 per cent to $1.39 bn, while international sales, including the UK, German, French, Japanese, and Chinese sites, were up 43 per cent to $1.15bn.
Amazon Prime is the company’s first membership program. For a flat membership fee of $79 per year, members get unlimited express shipping with no minimum purchase requirement. Members also get overnight shipping for only $3.99 per item.
Jeff Bezos, founder and CEO said: “Amazon Prime is ‘all-you-can-eat’ express shipping. Though expensive for the Company in the short-term, it’s a significant benefit and more convenient for customers. With Amazon Prime, there’s no minimum purchase to think about, and no consolidating orders.”
[img r]harrypotter6.jpg[/img]The company said customers worldwide have already placed “hundreds of thousands” of preorders for [i]Harry Potter and the Half Blood Prince[/i], due for release on July 16, 2005.
