Amazon.com delivers further proof: Economy is Scrooge for holiday shopping season
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The Web will not be spared from the slowdown in consumer spending that’s threatening the all-important holiday shopping season.
That much became clear today when Amazon.com Inc., the world’s largest online retailer, sharply lowered its 2008 revenue outlook as it anticipates a less-than-merry holiday season.
Amazon.com projected that 2008 sales might be $1 billion less than analysts’ estimates. That’s bad news for Amazon investors: Last year the holiday fourth quarter accounted for 43% of the Seattle retailer’s annual profit. Shares plunged 14% in after-hours trading despite Amazon’s reporting a 48% jump in third-quarter profit, buoyed by the free shipping service that prompted customers to buy more.
Last week EBay Inc. forecast its first quarterly sales decline and cut its annual earnings forecast. Amazon.com’s forecast, combined with EBay’s, suggests that the deepening financial crisis will hit online retailers just as hard as their bricks-and-mortar counterparts.
Wall Street pays close attention to Amazon.com as a bellwether for the Internet sector. Most analysts had expected online retail growth to slow for the first time this holiday season. But few expected Amazon.com to offer such a wide range of guidance or to lower it so much, said Sanford C. Bernstein & Co. analyst Jeffrey Lindsay.
Amazon.com said it now expected fourth-quarter revenue of $6 billion to $7 billion, which would be an increase of 6% to 23%. During a conference call with analysts, executives provided little more guidance. Chief Financial Officer Tom Szkutak said Amazon.com was being ‘appropriately conservative and prudent.’
‘We have limited visibility,’ Szkutak said.
That made investors jittery, Lindsay said.
‘With guidance that wide, it added to uncertainty in the sector,’ he said. ‘This might be setting the stage for the reset of Internet valuations and a rethink going into 2009.’
Amazon.com expects annual sales of $18.46 billion to $19.46 billion, down from the July forecast of as much as $20.1 billion.
The company’s third-quarter net income rose 48% to $118 million, or 27 cents a share, from $80 million, or 19 cents, a year earlier. Revenue grew 31% to $4.26 billion, Amazon.com said, the smallest gain in two years.
In regular trading, shares fell 24 cents to $49.99 but plunged $6.81 to $43.18 after the close. The stock is down more than 57% from its 52-week high of $101.09.
-- Jessica Guynn