Wednesday, August 8, 2012

Amazon Earnings Review: Margins Become Even Thinner

Amazon reported QE June 2012 financial results on July 26

I don't see anything uplifting whatsoever about this quarterly earnings report. Was it good for you? It wasn't for me. In fact, these results are depressing, even though CEO Jeff Bezos and CFO Tom Szkutak say the spending is for a long-term upside. A net income of $7 million on almost $13 billion of sales and an earnings per share of just a penny ($0.01) isn't working for any of us.

The only benefit of the doubt I can possible allow is calendar Q2 is a relatively slower quarter for Amazon. The Holiday Q4 is the annual financial performance peak. So we wait for later in the year and also for the this heralded long-term upside to materialize. These dismal financial charts speak for themselves.

Result, QoQ Change, YoY Change
Total Assets: $21.02 billion, +3%, +17%
Net Sales: $12.83 billion, -3%, +30%
Net Income: $7 million, -95%, -96%
Earnings per Share: $0.01, -96%, -98%

Outlook QE September 2012:
* Net sales are expected to be between $12.9 billion and $14.3 billion, or to grow between 19% and 31% compared with third quarter 2011.
* Operating income (loss) is expected to be between $(350) million and $(50) million, down from $79 million in the comparable prior year period.
* This guidance includes approximately $275 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

“Amazon Prime is now the best bargain in the history of shopping – that is not hyperbole,” said Jeff Bezos, founder and CEO of “We successfully launched Prime seven years ago with free unlimited two-day shipping on one million items. The price of annual membership was $79. Since then, Prime selection has grown to 15 million items. We've also added 18,000 movies and TV episodes available for unlimited streaming. And we’ve added the Kindle Owners’ Lending Library – borrow 170,000 books for free with no due dates – it even includes all seven Harry Potter books. What hasn’t changed since we launched Prime? The price. It’s still $79. We’re very grateful to our Prime members, and thank them whole-heartedly for the business and for the word-of-mouth that has made this program grow.”


Seeking Alpha