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Amazon loss beats Street
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October 27, 1999: 6:48 p.m. ET
E-tailer's 3Q revenue jumps 132%; expects drop in 4Q gross margins
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NEW YORK (CNNfn) - Amazon.com Inc. reported a third-quarter pro-forma net loss of $85.8 million, slightly less than Wall Street forecasts, as the online retailer more than tripled its loss from a year-ago while more than doubling its revenue.
The Seattle-based firm also noted, however, that it expects fourth-quarter gross margins to decline as its marketing and fulfillment expenses increase.
For the quarter ended Sept. 30, Amazon (AMZN) accrued losses of 26 cents a share, excluding special charges. Analysts polled by First Call expected the Seattle-based firm to lose 28 cents a share in the quarter. Revenue jumped 132 percent to $355.8 million.
Amazon disclosed its third-quarter results after markets closed.
Including $111 million in charges, Amazon lost $197 million, or 59 cents a share.
While beating Wall Street forecasts, the company widened its loss from the year-ago period, when it posted a loss of $24.5 million, or 8 cents a share, on $153.6 million in revenue.
Amazon shares fell 5-5/16 to close at 75-15/16 prior to its earnings announcement. Its shares fell to 73 in after-hours trade.
Gross margins to decline
At the end of the quarter, Amazon launched zShops, a service that allows anyone to sell merchandise through its Web site -- another step in the company's quest to become the leading e-commerce portal.
Analysts have said zShops should drive faster revenue growth because it allows the company to expand its reach without the burden of fixed assets.
But as Amazon has expanded well beyond its core book and music offerings, the company has extended its losses.
Although the company expects fourth-quarter revenue to "increase significantly" from third-quarter levels, Amazon said fulfillment expenses will increase and gross margins will decrease 2 to 3 percent as it expands its customer service and adds distribution space entering into the holiday shopping season.
Jeff Bezos, Amazon chairman and chief executive officer, said the company will triple its marketing expenses from third-quarter levels.
"We're taking no chances in marketing this holiday season," Bezos said. Part of Amazon's promotions will include gift-certificate promotions to attract online shoppers.
Bezos added that Amazon's fourth-quarter operating loss should be unchanged from third-quarter results. Analysts expect the company to report a fourth-quarter loss of 27 cents a share.
Company officials also said Amazon's U.S. books business should be profitable in the fourth quarter and throughout 2000.
Repeat customers represented 72 percent of Amazon's orders during the third quarter. Customer loyalty is a crucial ingredient of Amazon's business, especially in light of the prospects of online shopping for the upcoming holiday season.
Forrester Research expects consumers to spend $4 billion online during the holidays, nearly three times as much as last year.
For the first nine months of 1999, Amazon lost $204.9 million, or 63 cents a share, on $963.8 million in revenue, compared to losses of $51.6 million, or 18 cents a share, on $357 million in revenue in the year-ago period.
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