Amazon.com Inc. forecast an unexpected dip in operating profit for the current quarter, sending shares down more than 4 percent due to concerns about the costs of investments including new warehouses and video content.
The world’s largest online retailer also reported lower-than-expected fourth-quarter revenue and missed Wall Street targets for its closely watched cloud computing unit.
The Seattle-based company is spending heavily to take greater control of its delivery systems as well as expanding its video service around the world. Key to its plan is to entice sign-ups for Amazon Prime, its $99-per-year shopping club, which has led to users buying more goods, more often.
“The story is an investment story,” said Amazon Chief Financial Officer Brian Olsavsky on a conference call with reporters, noting “stepped-up” spending levels have continued into 2017.
That pace of investment has sometimes concerned investors.
“Low cost and fast delivery are a fundamental part of Amazon’s appeal to consumers. However, they are also its Achilles’ heel,” said GlobalData Retail analyst Anthony Riva in a note, warning of potential “profit erosion” this year.
Sales in the first quarter will have a tough comparison to the year prior, he added, when foreign exchange rates were more favorable and the Feb. 29 leap day gave shoppers an extra 24 hours to spend.
The just-ended holiday season was Amazon’s best-ever, the company has said. It was a heavily promotional period for Amazon, Olsavsky said, though he did not comment on how discounts compared with prior years.
Net sales for Amazon rose 22.4 percent to $43.74-billion (U.S.) in the fourth quarter, compared with the average analyst estimate of $44.68-billion, according to Thomson Reuters I/B/E/S.
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