this June 16, 2014 file photo, Amazon CEO Jeff Bezos walks
on stage for the launch of the new Amazon Fire Phone, in
Seattle. Amazon.com reports quarterly financial results on
Thursday, Oct. 23, 2014.
— Amazon's trademark smile icon is becoming more of a grimace.
largest online retailer reported a wider third-quarter loss than
analysts expected and gave a disappointing holiday forecast.
increasingly irked by Amazon's strategy of investing heavily in
new products and services to spur revenue growth while reporting
quarter after quarter of losses or thin profit. The stock price
tumbled 11 percent after the results came out Thursday. That's on
top of the 22 percent decline the stock has already suffered this
Officer Thomas Szkutak said the company had to be
"selective" in taking on new projects. For years,
Amazon's strategy has been spending the money it makes to grow and
expand into new areas. It launched a smartphone, the Fire, this
summer and has been offering a set-top video-streaming device, a
streaming video service and several tablets and e-book readers.
The company has
also been investing in services for its $99-a-year loyalty
program, Prime. It has added a grocery delivery services and music
streaming for Prime members as well as offering original TV shows
such as the critically acclaimed "Transparent" starring
But all of those
initiatives cost money and time to develop. And not all of them
have been hits.
splashy launch of its Fire phone was quickly followed by mediocre
reviews and a steep price cut to entice buyers. Amazon said it
took a charge of $170 million related to "inventory
evaluation and supplier commitment costs" for the Fire,
although it did not give further details. Amazon has about $83
million of Fire phone inventory at the end of the quarter.
So investors are
increasingly signaling that Amazon needs to work harder at turning
was looking for more in terms of revenue and operating income and
the fourth-quarter outlook," said Morningstar analyst R.J.
Hottovy. "It's going to be a competitive landscape for
retailers this holiday season and retailers will compete
aggressively for consumers."
In a conference
call with analysts, Szkutak said the company is focused on
"using its capital wisely so that over time we get good
returns on invested capital."
But he agreed the
company needed to choose new projects carefully.
certainly have been in several years now of what I will call in
investment mode," he said. "There's still lots of
opportunity in front of us but we know that we have to be very
selective about which opportunities we pursue. "
Net loss for the
quarter was $437 million, or 95 cents per share, far steeper than
the loss of 76 cents per share analysts were expecting, according
to FactSet. Revenue jumped 20 percent to $20.6 billion, but that
fell short of expectations as well.
said it expects holiday quarter revenue of $27.3 billion and $30.3
billion, below analyst expectations of $30.9 billion. That's an
increase of 7 percent to 18 percent — slower growth than the
prior-year holiday quarter when sales rose 20 percent.
Szkutak said the
stronger dollar will hurt fourth quarter revenue by about 2.5
period is crucial because retailers make a chunk of their annual
profit, about 20 percent, in November and December. Overall, the
National Retail Federation expects sales during the period to be
up 4 percent to $617 billion.
Amazon CEO Jeff
Bezos said the company was focused on making the holidays
"easier and more stress free" than ever.
The company has
hired 80,000 seasonal workers and has expanded its Sunday shipping
service. It now has more than 50 distribution centers in the U.S.,
up from 40 last year. And in July it announced it was opening
eight smaller sorting centers for a total of 15 by the end of the