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Amazon shares dropped 8% after projected holiday season sales and profit missed targets. This forecast shows the slowest revenue growth that would in years for the world’s largest online retailer.
Disappointing international results
Amazon’s holiday season spans the period from Thanksgiving in late November to New Year’s Day. The company expects fourth-quarter sales to rise between 10 and 20 %, or up to 72.5 billion dollar (64 billion euro), while analysts were expecting 73.9 billion dollar (65 billion euro): if the forecast is correct this Amazon’s lowest quarterly sales growth since 2016. “Weak revenue growth stuck out like a sore thumb,” analyst George Salmon said to Reuters: “When you’re trading on 70 times expected earnings, it doesn’t take much to jolt the share price.”
Amazon’s third-quarter sales lagged as well: analysts are disappointed by the international results and guess increasing online competition is to blame. Neil Saunders, managing director of GlobalData Retail, said the results reflected a shifting landscape with retailers holding their own against Amazon.
Investments and efficiency
Amazon made expensive investments in new technology and programs: the acquisition of Whole Foods in 2017 cost 13.7 billion dollar (11.6 billion euro). The plan to enter the American grocery market resulted in high profits earlier, when consumers shifted to shopping online instead of brick stores.
53 % of goods sold on Amazon come from third-party merchants, the company said on Thursday: this signifies a huge shift away from traditional retail, where Amazon is the seller of a product. These services grew 31 % to 10.4 billion dollar in the third quarter. More and more sellers use Amazon to market their products.
