The world’s largest online retailer Amazon (AMZN, Financial) came out with some highly disappointing numbers for the recently concluded third quarter of fiscal 2014, and the trend is expected to carry on in the fourth quarter as well. The stock price took a beating as the Seattle-based retailer’s top and bottom line were both deep in red, and missed analyst expectations by a long shot. Here’s a quick look at Amazon’s latest earnings and how the company plans to fix this.
A peek into the numbers
The e-commerce mammoth reported a loss per share of $0.95 on revenue of $20.58 billion. Analysts had expected a revenue of $20.84 billion and a loss per share of $0.74. However, sadly the company failed to satisfy the investors with the reported numbers. Even the operating loss figure seems a little high at $544 million. However, the figure was well within the guidance (ranging between $410 million and $810 million) that the company had provided earlier.
On a positive note, consolidated revenues increase by 20% compared to the prior year period due to favorable foreign exchange rates, and both operating cash flow and free cash flow increased over the trailing twelve months. Unfortunately, the top line growth wasn't reflected in the net revenues figure and Amazon reported net loss of $437 million.
During the three months period Amazon came out with the Fire Phone which failed to gain much traction, and thus softly killed the management’s hope to strike back. For the ongoing fourth quarter, Amazon expects operating loss to range between $430 million and $570 million, but forecasted an 18% growth (ranging between $27.3 billion and $30.3 billion) in its top line compared to the fourth quarter of 2013.
How Jeff Bezos plans to control the situation
While many may criticize plans being carried out by Jeff Bezos, there are many who share the vision with him and understand what’s driving him. Jeff is looking at the situation from a long term perspective. The company is carefully forming strategies that are going to drive its future growth. The CEO isn’t focused on how the company is doing on a quarterly basis. With added stress on cloud computing and growth of e-commerce in the international markets, Amazon's CEO is optimistic about its upside potential. He strongly believes in the initiatives being undertaken and expects them to kick in when the right time comes.
Analysts and industry experts believe the forthcoming holiday season will help the company bag better numbers. In the words of Jeff Bezos, "As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever.” During the third quarter, Amazon announced two Kindle models - the Kindle Voyage which the company says is the thinnest and most advanced Kindle ever, and the $79 Kindle with better processor and bigger storage. Apart from these, the quarter was characterized by a launch of a host of other products, such as the all new Fire HD, Fire HD Kids Edition, and Fire HDX 8.9. All these offerings along with a couple of others are likely to boost holiday sales for the e-commerce giant.
“We remain heads-down focused on driving a better customer experience through price, selection and convenience. We believe putting customers first is the only reliable way to create lasting value for shareowners” said Amazon CFO Tom Szkutak during the earnings call. “In terms of the fundamentals, long term we're very excited about international as well as North America…We continue to focus on the inputs. Some of those inputs are certainly on the media side working on the conversion from physical media to digital media.”
Parting thoughts
Amazon’s chances of making a quick recovery may not be much and even the company believes its short term performance won’t be up to scratch. However, with a little time and patience, the retailer’s performance is expected to shoot up. After all, Amazon is a fundamentally strong company.
