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Will Amazon’s Results Bring Hopes for the Future?

July 18, 2014 | About:
Suravi Thacker

Suravi Thacker

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The online shopping giant Amazon (AMZN) is slated to report its second quarter numbers on July 24th of this month. This retailer is the most sought after since it provides all the products possible at just a click. Products can be ordered at the ease of sitting on the bed or while taking a walk. Therefore, investors are eagerly waiting for its results and have high expectations from this online giant.

Expectations thereof

According to Yahoo Finance, Amazon is expected to report $19.32 billion of revenue as against the top line of $15.7 billion in the previous year. This growth of 23.1% is mainly because the retailer is ruling the market by providing the lowest prices and fastest delivery possible among all the peers.

However, it is expected to register a loss of $0.15 per share. This is wider than the loss of $0.02 per share in the year ago quarter. Also, the company had reported loss in the last two quarters.

Hindrances galore

Firstly, the biggest blow to the online retail giant was the sales tax reform. According to the new rule, Amazon is supposed to charge sales tax on its products. This rule has made its products expensive, enabling shoppers to shift back to brick and mortar retailers or other online players. This reform is applicable in 20 States in U.S, and resulted in a loss of 9.5% in sales.

Secondly, the company increased its fees for Prime memberships by almost $20. Although this increase led to higher membership fees in the first quarter, since it was effective from the second quarter, it will now have an effect on the second quarter numbers.

Further, Amazon’s step to cut prices of its Web Service will play an important role. The reduction in price will lead to lower revenue. But it should also increase the volumes, resulting in a healthier bottom line. However, the price cut will have an adverse effect on the margins and the bottom line. This was probably the reason why the company revised its outlook for the second quarter.

Some positives to note

Nonetheless, the online retailer is busy strengthening other aspects of its business to attract customers. It has been expanding its distribution facilities so that it can make its deliveries faster. Also, it is expanding its International footprint in order to make the most of the growing online demand.

Moreover, it registered a great jump in same store sales for the month of June. The metric rose 34.4% in June, much higher than the growth of 28.1% in May. This shows Amazon’s popularity and customers’ increased interests in the retailer’s shopping portal.

Also, the retailer has launched its first ever smartphone, which will compete with Apple and Samsung. The new device will make shopping easier and has a 3-D camera. This helps in identifying other products and getting it ordered at just a click. Also, it plans to launch Fire TV, which should again work as an added advantage.

What to expect

Amazon believes in efficiency and is taking measures to meet the target. Although sales tax reform has brought some problems to the retail giant, its efforts to make other aspects stronger and adding new products to its arsenal is commendable. The jump in its same store sales highlights that it continues to resonate well with the customers. Hence, Amazon should be on the right track this quarter.


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