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Amazon sees river of red ink
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March 30, 1998: 8:35 p.m. ET
Revenue growth expected to slow down as competition heats up
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NEW YORK (CNNfn) - Increased competition and higher promotional expenses are expected to add up to more red ink at Amazon.com Inc.
According to documents filed Monday with the Securities and Exchange Commission, the online book seller said it expects to report "substantial operating losses for the foreseeable future" and the company warned the losses could increase "significantly" from current levels.
The Seattle-based company did not elaborate on the size of the losses or when it expects to be profitable. However, according to First Call, which tracks Wall Street estimates, analysts expect the company to lose about $1.28 a share this year and remain in the red until the third quarter of 1999.
Since its inception in 1994, Amazon (AMZN) has accumulated $33.6 million in losses. For all of 1997, the company posted a loss of $27.6 million, or $1.27 a share, despite a whopping 841 percent rise in revenues to $147.8 million.
The company said such dramatic revenue growth is likely to result in increased competition from rival companies. In addition, new technologies, such as "shopping agents" -- which allow Internet customers to compare prices quickly -- also are expected to add to the competitive environment.
"Although the company has experienced significant revenue growth in recent periods, such growth rates are not sustainable and will decrease in the future," the company said.
In order to succeed, Amazon said it must continue to invest in marketing, promotion and distribution.
Late last year, the company opened a 200,000-square-foot distribution center in Delaware and expanded its Seattle distribution center to 85,000 square feet. Amazon said it may establish one or more additional centers over the next 12 months and increase its inventory levels in order to remain competitive with other retailers.
Amazon.com, which bills itself as the world's largest bookstore, has been one of the hottest Internet stocks on Wall Street since it went public, climbing from just over $20 a share to nearly $86.
However, the upstart company is facing stiff competition from Barnes & Noble, which recently inked a deal with America Online to sell books on the service's marketplace section. 
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