Amazon’s profits remain weak | Pueblo Chieftain

SEATTLE —‘s earnings slid in the second quarter as the online retailer continued its pattern of producing weak profits while adding to its offerings around the globe. Stock traders pulled back slightly on the initial earnings report but the high-flying stock recovered by Friday.

“Investors would almost certainly have pummeled any other retailer that turned in the kind of performance that Amazon reported Thursday. Instead, they give Amazon several miles of leash because of its history of turning investments into sales growth and technology leadership,” The New York Times reported.

Amazon’s earnings per share totaled 40 cents, or $197 million, down from $1.78 per share, or $857 million, in the same period last year. Analysts had forecast earnings of $1.42 per share. Since its founding in 1994, Amazon has struggled to turn a profit.

Amazon reported its second quarter results after the market closed on Thursday, and investors pushed the shares down 3.1 percent to $1,013 in after-hours trading. The drop ended Amazon CEO Jeff Bezos’ brief reign as the richest person in the world, a title he had stolen from Bill Gates on Thursday morning in the midst of an early rally. On Friday, the stock rebounded from the after-hours selling and was down only about 1 percent by midday.

Other financial discosures by Amazon showed the retailer remains on its unflagging course to expand its services, raking in $38 billion in second-quarter sales, a 25 percent jump from last year.

But its greatest growth didn’t come from the company’s sale of its own retail goods. Revenue from other ventures — from logistics to Prime memberships to cloud computing — grew at a way faster pace, a sign of how the Seattle-based retail giant is becoming a major platform for technology, media and commerce.

Excluding the impact of foreign-exchange gyrations, the money Amazon collects from third-party merchants — in exchange for providing them with logistics services or just letting them sell on its online site — rose 38 percent in the second quarter, to $7 billion.

Amazon Web Services, the profitable unit that rents out computing power and storage, saw revenue rise 42 percent to $4.1 billion. That means it’s now a $16 billion-a -year venture — the largest operator of the cloud computing in the world.

And the fees Amazon gathers from $99-a-year subscriptions to the Prime loyalty program and other services (such as music, video and audiobooks) rose 51 percent to $2.16 billion.

In comparison, direct sales by Amazon of retail products rose by 17 percent to $23.75 billion. While still accounting for the majority of the company’s revenue, its share is shrinking as other businesses outpace its growth.

Amazon’s second-quarter operating income fell 51 percent to $628 million, reflecting a ramp up in the construction of warehouses and data centers as Amazon invests to meet demand, as well as a hiring spree.

As of the end of June, Amazon employed 382,400 people, 42 percent more than in the same period last year.

It’s not the first humongous payroll expansion by Amazon. The company has grown at a similar pace over the last few quarters, and now — as it prepares to take over Whole Foods Market and hire an extra 50,000 people ahead of the holiday retail season — it’s on track to soon become the second-largest employer among Fortune 500 firms, after Wal-Mart.

A lot of those hires have been relatively low-paid warehouse and logistics workers. But last quarter’s hiring wave focused heavily on software developers, as well as sales people for Amazon Web Services and an emerging advertising business.

Amazon Chief Financial Officer Brian Olsavsky pointed out in a call with analysts Thursday that hiring for these roles exceeded the company’s overall growth rate. “We are continuing to invest a lot in these areas,” he said.

But investment also continues apace in Amazon’s core retail offerings. The company made a huge bet last month by agreeing to acquire Whole Foods for $13.7 billion. Olsavsky said that Amazon acquiring a brick-and-mortar footprint didn’t imply an abandonment of its other approaches to selling food and other consumables.

“We believe there will be no one solution,” he said. “We’ll see how our customers respond.”

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