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Amazon Disappoints Wall Street in Q4, Shares Plunge

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Amazon

Good isn’t always good enough.

Online shopping behemoth Amazon on Thursday reported fourth-quarter profits of $482 million, or $1.00 per diluted share, up from $214 million, or $0.45 per diluted share, in the same period in fiscal 2014.

But while net sales for the quarter ended Dec. 31 increased 22 percent to $36.7 billion from $29.3 billion, analysts polled by Thomson Reuters had forecast revenue of $35.93 billion.

Shares were down more than 10 percent in premarket trading Friday.

“The last three quarters the company generated bottom-line results that were materially above [Wall] Street expectations,” Mark Mahaney, an analyst with RBC Capital Markets, told The New York Times. “That set up expectations we would see more of the same. We didn’t.”

Despite disappointing analysts in the fourth quarter, 2015 was not a disaster. The Seattle-based company said that paid memberships to its Prime service (which costs $99 per year and offers free one- or two-day shipping on most items, among other perks) increased 51 percent worldwide throughout the year—47 percent in the United States. Recent estimates have put the number of U.S. Prime members at roughly 54 million.

However, fulfillment cost Amazon $4.5 billion in the fourth quarter, up from $3.4 billion in the year-ago period, and increased from $10.8 billion to $13.4 billion in the year ended Dec. 31, which also impacted the bottom line.

As previously announced, Fulfilment by Amazon (FBA)—which handles independent sellers’ back-end operations such as storage, fulfillment and customer service—shipped more than one billion units in 2015 and active sellers using the service grew more than 50 percent. In the fourth quarter, FBA units represented nearly 50 percent of total third-party units.

In addition, Amazon.in was the top e-commerce website in India throughout Q4, according to global analytics firm ComScore, while sellers on the site sold more in that three-month period than in all four quarters combined in 2014.

“Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers,” Jeff Bezos, founder and chief executive officer, said. “And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like day one.”

Amazon is predicting net sales of between $26.5 billion and $29 billion, as well as operating income of between $100 million and $700 million, for the first quarter of fiscal 2016.

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