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Amazon narrows loss
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July 23, 2001: 6:17 p.m. ET
Web retailer's 2Q loss beats Street, but sees lower 3Q sales growth
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NEW YORK (CNNfn) - Amazon.com Inc. posted a narrower second-quarter loss Monday, beating Wall Street expectations, yet sparked investor concerns as sales came in shy of forecasts and the company projected continued pressure going forward.
The online merchant also said it anticipates third quarter sales between $625 million and $675 million, at the lower end of Wall Street's expectations, and fourth quarter sales 10-20 percent higher than the year-ago quarter, within the range of expectations.
For the quarter ended June 30, Seattle-based Amazon (AMZN: Research, Estimates) reported a loss of $58 million, or 16 cents a share, on revenue of $668 million, compared with a loss of $116 million, or 33 cents a share on revenue of $578 million a year earlier.
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 Amazon.com CEO Jeff Bezos speaks with CNNfn's Jan Hopkins on his company's earnings and outlook. |
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Analysts on average anticipated a loss of 22 cents a share on revenue of $677.67 million, according to earnings tracker First Call.
Including one-time items, Amazon.com reported a net loss of $168 million, or 47 cents a share, compared with a net loss of $317 million, or 91 cents a share a year earlier.
Shares of Amazon sank to $15.07 in after-hours trading following the release of results after ending the regular session at $16.03.
The company reiterated its plans to achieve first-time profitability by the end of the fourth quarter, pointing to its first ever operating profit in its U.S. business.
"We continue to make progress toward reaching pro forma operating profitability in the fourth quarter of 2001," Chief Financial Officer Warren Jenson said. "This quarter, the U.S. was profitable on a pro forma operating basis for the first time, and this is our sixth sequential quarter of improved absolute pro forma operating results."
Jenson told analysts during a conference call Monday that the company would sacrifice sales growth in order to reach profitability.
In the second quarter, Amazon gained 2.6 million new customers and improved the speed with which it turned over inventory. The company also trimmed the cost of each transaction to 13 percent of net sales from 15 percent a year earlier.
Wall Street remains skeptical of Amazon's big promise to post an operating profit by the end of the fourth quarter. On average analysts are expected a loss of 8 cents a share in the fourth quarter and a loss of 69 cents for fiscal 2001.
Amazon is striving to turn a profit amidst a slowing economy that has left virtually all retailers struggling as consumer demand is dampened by massive layoffs, high energy prices and a volatile stock market.
In June Amazon reiterated its stance that it would post a fourth quarter profit and further added that it expects to remain profitable for all of 2002.
But analysts and investors have questioned whether the company can keep enough cash on hand in order to keep operating long enough to realize that profit. On Monday, the company said it ended the quarter with $609 in cash and marketable securities. The company anticipates third quarter cash to be more than $600 million and fourth quarter cash on hand of $900 million, including a $100 million investment from media conglomerate AOL Time Warner (AOL: Research, Estimates), parent company of CNNfn.com.
Online retailers also have struggled since the tech bubble burst a year ago, signaling the end for many while others were left trying to turn a profit on razor thin margins. Amazon, despite launching an online PC store and entering the institutional book market, must also cut costs in order to improve its top line growth, ABN Amro Analyst Arthur Newman said.
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"It's a tough retailing environment. The real question is have they been able to pull back a bit on the cost structure?" Newman said. "Can we read enough into this quarter to gain enough confidence to expect they will break even in the fourth quarter?"
One strategy the company has taken to reduce costs is to enter partnerships with traditional brick and mortar retailers for certain items such as Toysrus.com for toys and Borders Group Inc. for books.
Analysts anticipate further such partnerships as the company moves into the second half and the all-important holiday season. In these deals, Amazon would handle delivery and order fulfillment, leaving the marketing and advertising up to the retailers.
CEO Jeff Bezos suggested to analysts in a conference call Monday that the company would continue to seek out such alliances.
"We're building a unique global platform...In the last 18 months we found that sellers and partners are interested in complementing their online and offline businesses with Amazon's platform," Bezos said.
Amazon.com also announced an expanded multi-year marketing agreement with AOL Time Warner shortly before releasing its results.
"This partnership will have the effect of significantly expanding our reach," Bezos told analysts. 
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