Amazon Sales, Revenue Forecast Miss Estimates; Shares Decline

(Bloomberg) --Amazon.com Inc. reported sales that missed analysts’ estimates, and issued a disappointing revenue forecast for the busy holiday quarter, suggesting the online marketplace may be reaching a saturation point in the U.S.

Revenue gained 29 percent to $56.6 billion in the third quarter, the e-commerce giant said Thursday in a statement. Analysts’ projected $57.1 billion. Sales will be from $66.5 billion to $72.5 billion in the current period, falling short of analysts’ average estimate of $73.8 billion. Shares declined as much as 6.5 percent in extended trading.

U.S. shoppers are projected to increase their online spending by as much as 22 percent this holiday season, according to Deloitte Insights. Amazon is poised to benefit from that shift, capturing almost half of all U.S. online sales, according to EMarketer Inc. While Amazon has dominated e-commerce in the U.S, it faces stepped-up competition from rivals like Walmart Inc.

The company showed slowing revenue growth in all categories quarter over quarter, including online sales and subscription sales, Amazon Web Services sales and its fast-growing advertising business. Amazon has relied on the growth of its Prime members, estimated at about 97 million in the U.S., who pay fees in exchange for shipping discounts, video streaming and other services.

Amazon’s stock had gained about 50 percent this year, as investors bet on the Seattle-based company’s continued dominance and its expansion into new areas. The shares have dropped about 15 percent from their September high amid a broader market downturn and closed at $1,782.17 before the results were released.

Amazon also is investing in physical stores and the pharmacy business. It purchased online pharmacy PillPack in June, which followed its $13.7 billion acquisition of Whole Foods last year to jump start its grocery business. It has opened cashier-less AmazonGo stores -- which sell premade sandwiches, salads and grocery items -- in San Francisco and Chicago. The company’s fast-growing cloud computing and advertising units, which are more profitable than its main e-commerce business, help fuel Amazon’s investments in more retail categories, video content and devices such as tablets and Echo smart speakers.

Amazon Chief Executive Officer Jeff Bezos spends heavily to keep ahead, building new warehouses and data centers around the world, inventing new devices and trying to re-imagine the convenience store experience. Investors can get skittish when signs suggest the company is ramping up expenses without regard to maintaining a profitable business.

Parcel delivery capacity issues and a tight labor market could prevent Amazon from meeting demand. Amazon plans to hire 100,000 seasonal workers this year and pledged to pay all of its warehouse workers at least $15 an hour, which could help it secure the extra staff it needs during peak season. The company also launched a new program to help people buy vans and start their own businesses making Amazon deliveries.

Amazon reported net income of $2.88 billion, or $5.75 a share in the third quarter, from $256 million, or 52 cents, a year earlier. Analysts estimated profit of $3.11 a share.