Info-tech

Push for one-day delivery dents Amazon’s profits

Reuters July 26 | Updated on July 26, 2019

Amazon.com Inc reported its first profit miss in two years, and said income would slump in the current quarter, as it ramps up spending on one-day delivery to spark sales growth.

The company also said its investment in faster shipping was starting to pay off, with revenue rising 20 per cent to $63.4 billion in the second quarter that ended in June. That topped both analysts’ estimates and the 17 per cent growth rate that Amazon posted in April.

Amazon has drawn more than 100 million paid subscribers to its loyalty club Prime by releasing original TV shows, equipping more gadgets with its voice assistant Alexa and offering quick shipping for countless goods, including groceries from its subsidiary Whole Foods Market.

The cost slightly exceeded the $800 million Amazon had forecast it would spend on the initiative in the second quarter, CEO Brian Olsavsky said on a call with reporters.

Amazon’s profit inched up to $2.6 billion in the quarter, short of $2.8 billion that analysts were expecting, according to IBES data from Refinitiv. Operating expenses had jumped about 21 per cent.

Revenue from seller services grew 23 per cent to $12 billion in the second quarter, while ad and other sales increased 37 per cent to $3.0 billion.

Sales growth for Amazon’s cloud unit was below 40 per cent for the first time in years. The unit raked in $8.4 billion in revenue in the second quarter, or 37 per cent more than the year prior.

Published on July 26, 2019

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