Amazon: Loss shrinks, but sales slow

Summary:The shopping site beats Wall Street targets as it reports a pro forma loss of 16 cents a share in the last quarter.

Amazon.com shares fell late Monday after the Net retailer reported a smaller-than-expected loss but warned that sales would slow for the remainder of the year.

The Seattle-based e-tailer posted a pro forma operating loss of $58 million, or 16 cents a share for its second quarter, compared with $116 million, or 33 cents a share, a year earlier. Amazon's operating loss included net interest expense.

Amazon was expected to post a loss of between 20 cents and 27 cents a share on sales of between $675 million and $685 million, according to analysts polled by First Call. The consensus loss estimate was for 22 cents a share.

On a net basis, including charges, Amazon posted a narrower loss of $168 million, or 47 cents per share, compared with a loss of $317 million, or 91 cents per share, a year earlier.

Though the company beat earnings estimates, it saw its sales growth slow. Revenue rose 16 percent to $668 million, up from $578 million a year ago, but was down from the $700 million it reported in the first quarter.

For the third quarter, Amazon projected revenue between $625 million and $675 million. Analysts were expecting sales of $732.9 million, according to First Call. The e-tailer's estimate that fourth-quarter sales would be 10 percent to 20 percent above year-ago levels also falls short of Wall Street projections calling for sales of $1.26 billion.

Also Monday, AOL Time Warner announced it had made a $100 million equity investment in Amazon and expanded a pre-existing marketing agreement reached in 1997. Under the new deal, Amazon will promote AOL as its exclusive Internet service provider and the two companies will work together on e-commerce efforts and expand the agreement overseas.

In regular trading, Amazon shares closed at $16.03, down 95 cents. In after-hours trading, the shares slipped to just below $15.

Some analysts, including Anthony Noto of Goldman Sachs and Faye Landes of Bernstein, had said Amazon might exceed estimates. Landes speculated that Amazon might come in at the $700 million range instead of the $675 million that most analysts had predicted.

Amazon, which used to symbolize the "get big fast" philosophy practiced by technology companies, has been on a sleeves-rolled-up mission to trim costs, squeeze out efficiencies and show the world it can turn a profit.

During the past two quarters, Amazon has begun bundling products that sell well together, dropped popular products that cost too much to ship, aligned with former competitors and bolstered relationships with suppliers.

The fruit of that is that Amazon improved its gross profits--a measurement equal to sales minus cost of sales that is a key gauge of retail efficiency--from $136 million to $180 million and lowered fulfillment costs to 13 percent of net sales, down from 15 percent.

Amazon reiterated Monday that it is still on pace to reach pro forma operating profitability by the end of the year.

Amazon also recorded a loss of $41 million over the last six months because of its investments in Webvan, Sotheby's Holdings, WeddingChannel.com, Ashford and Drugstore.com. Webvan went out of business earlier this month.

Reuters contributed to this report.

Topics: Amazon

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