Amazon expected to post a loss on revenue gains
By Hayley Tsukayama,
Amazon is set to report earnings Thursday as the company gears up for holiday sales.
The online retailer takes in a lot of cash through sales, but it also pays a lot in operating costs.
The consensus among analysts is that Amazon will post revenue of $13.9 billion, a double-digit increase from the same period last year. Earnings per share are expected to drop by around 7 cents, compared with a 14-cent gain in the third quarter of 2011.
In July, Amazon said it expected to make about $13 billion sales revenue and forecast an operating loss between $50 million and $350 million.
The retailer will be making a big holiday push this season to boost sales of its new line of Kindle tablets, which come in 7- and 9-inch sizes. The company also has a 4G model, which is the same price as the basic, WiFi-only model of Apple’s iPad.
The company sells its Kindle devices at or near cost — according to an interview the company’s chief executive Jeff Bezos gave to All Things Digital. To profit from the hardware, Amazon needs to persuade users to buy access to its a la carte video service, books and products on the Kindles.
Consumers aren’t expected to spend much more this Christmas season than they did last year. According to a report from The Washington Post, average shoppers are expected to spend only $9 more than the $740 they shelled out last year. Retailers are preparing aggressive deals to lure shoppers into their stores in the sluggish economy, the report said.
Online retailers have been faring better in the slow economy than many of their brick-and-mortar rivals. As the Associated Press noted, eBay reported strong earnings with net income up 22 percent.
Meanwhile, Best Buy announced Thursday that it expects store sales to continue declining and offered a weak outlook for the third quarter ahead of its Nov. 20 earnings release. The retailer is also restructuring, replacing its U.S. president and the executive vice president of its U.S. operations.
Aggressive moves from Amazon, such as plans for same-day shipping, have the potential to eat even further into brick-and-mortar sales — even if the company has to start charging sales tax and loses its price advantage in the future.
The company is certainly not slowing down, announcing Thursday that it is releasing a Kindle app for Microsoft’s new operating system that will come pre-loaded on Acer, Asus, Dell, HP, Lenovo and Samsung Windows 8 devices.