Amazon’s profits down

AmazonOnline bookseller Amazon is predicting an unexpected dip in operating profit for the current quarter, 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 cloud computing unit.

The Seattle-based company is spending heavily to take greater control of package delivery and to expand its video service around the world. It wants to promote sign-ups for Amazon Prime, its $99-per-year shopping club, which leads to users buying more goods, more often.

Amazon Chief Financial Officer Brian Olsavsky told assorted hacks that he had “stepped-up” spending levels all the way into 2017.

For years, Amazon has posted roller-coaster results as founder and Chief Executive Jeff Bezos emphasizes building up businesses rather than making an immediate profit. He has sunk profits into new areas that have either built new markets – as with cloud services or its Kindle e-readers.

Sometimes it works, other times it doesn’t and some investors are uneasy.

Sales in the first quarter will have a tough comparison to the year prior, Amazon’s Olsavsky said, when foreign exchange rates were more favourable and the 29 February leap day gave shoppers an extra 24 hours to spend.

The just-ended holiday season was Amazon’s best-ever. It was a heavily promotional period for Amazon, said Olsavsky, though he did not comment on how discounts compared with prior years.

Net sales for Amazon rose 22.4 percent to $43.74 billion in the fourth quarter, compared with the average analyst estimate of $44.68 billion.

Amazon is producing television shows for Prime subscribers to watch online. It is developing gadgets with an artificially intelligent assistant, Alexa, so users can buy toilet paper and other goods by voice command. And it is building out a system of trucks, planes and warehouses so orders are sped to Prime members in two days or less, a convenience that few online retailers can afford to match.

The company forecast first-quarter operating income between $250 million and $900 million, below the consensus estimate of $1.34 billion.

Amazon had reported operating income of $1.1 billion for the same period last year.

Amazon Web Services, the company’s fast-growing and lucrative cloud business, posted a 47 percent jump in revenue to $3.54 billion, but fell short of the average analyst estimate of $3.60 billion, according to FactSet StreetAccount. Amazon is the market leader in the space, selling computer services, hosting websites and storing data.