Thursday, July 25, 2019

Earnings: "Amazon’s big bet on 1-day delivery is costing more than expected and cutting into profits" (AMZN)

The stock was down $32.32 (1.64%) to $1,941.50 in late after-hours trade.
Two from GeekWire, source for all things Seattle and/or geek.

Turns out that trying to promise 1-day delivery to tens of millions of customers costs a lot of money.
Amazon announced plans earlier this year to shift its free-two day shipping program for Prime members to one day, speeding up delivery times for the company’s most valuable customers. It forecasted an $800 million expense for the second quarter as it began to roll out the initiative.

On a call today with reporters following its Q2 earnings report, Amazon CFO Brian Olsavsky said that while customers are responding well to 1-day shipping, costs came in slightly above his earlier estimate. He cited “additional transition costs” such as adding inventory and moving it closer to the customer.

“Essentially, productivity was off a bit in our warehouse and transportation networks as we were expanding capacity pretty quickly,” Olsavsky said.
Amazon lowered expectations for its operating income in the current quarter, down as much as $1.6 billion from last year, suggesting that the company is spending big on new initiatives such as 1-day shipping....MUCH MORE
And earlier:
July 25, 2019 at 3:59 pm
Amazon Web Services powers tech giant’s profits, again, but slower growth raises new questions

Amazon Web Services posted $8.4 billion in net sales and $2.1 billion in operating profits in the second quarter, continuing its outsized impact on the tech giant’s overall bottom line.

But growth in AWS net sales slipped below 40 percent for the first time, compared to the same quarter a year ago. The growth rate raised questions about the public cloud leader’s momentum in the midst of the tech giant’s second-quarter earnings miss, which sent Amazon stock down in after-hours trading.

The $2.1 billion in AWS operating profits represented more than two-thirds of Amazon’s companywide operating profits, helping the company to continue to make huge investments in the rest of its business.

On a conference call with reporters, Amazon CFO Brian Olsavsky acknowledged the lower percentage growth rate in AWS net sales, but noted that AWS has a $33 billion run rate, referring to net sales it would post for a full year at its current pace. That’s up from a run rate of $24 billion one year ago....MORE