Amazon posts surprise loss after spending on warehouses, content

Bloomberg NewsJuly 25, 2013 

— Amazon.com reported a surprise net loss as the world’s largest online retailer continued to pump money into warehouses and digital content.

The second-quarter net loss was $7 million, or 2 cents a share, the Seattle-based company said in a statement Thursday. Analysts had projected a profit of $28.8 million on average, or 6 cents, according to data compiled by Bloomberg. Sales rose 22 percent to $15.7 billion, matching analysts’ average estimate.

Chief Executive Officer Jeff Bezos is betting that near-term investments on cloud computing and a massive fulfillment infrastructure that lets the company deliver anywhere in the country in two days will provide cash flow down the line. Expenditures more than doubled in 2012 compared with 2011 and continued to climb this year.

“The clock is ticking for Amazon to show that it can sell its goods and services while making a profit that might start to justify its market capitalization,” said Colin Gillis, an analyst at BGC Partners in New York.

Amazon fell in extended trading. The shares advanced 1.5 percent to $303.40 at the close in New York. The stock has gained 21 percent this year, compared with a 19 percent climb in the Standard & Poor’s 500 Index.

Revenue in the current quarter will be $15.5 billion to $17.2 billion, Amazon said, compared with the average analyst estimate of $17 billion.

Amazon, which began as an online seller of physical books in 1995, now sells everything from apples to treadmills to millions of customers. Subscribers to the online retailer’s $79 annual Prime membership service, which ships packages in two days, spend three to four times more than non-members, according to Colin Sebastian, an analyst at Robert Baird & Co. in San Francisco who rates the stock the equivalent of a buy.

While the online retailer ended 2012 with a loss of $39 million, investors have rewarded Bezos’s investment strategy with one of the highest valuations among the company’s peers. Amazon is trading at 55 times next year’s earnings, compared with a price-to-earnings ratio of 16 for EBay Inc., according to data compiled by Bloomberg.

The company is competing in a U.S. e-commerce market that’s projected to increase to $370 billion in 2017.

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