Amazon Came Close to Not Losing Money Last Quarter
Jeff Bezos is breathing easy today. Amazon released a few details from their quarterly SEC filing and it looks like Bezos managed to narrowly avoid being penalized by one of the secret clauses in his contract.
According to the press release, Amazon lost $7 million last quarter.
Net sales increased 22% to $15.70 billion in the second quarter, compared with $12.83 billion in second quarter 2012. Excluding the $392 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 25% compared with second quarter 2012.
Operating income decreased 26% to $79 million in the second quarter, compared with $107 million in second quarter 2012. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $18 million.
Net loss was $7 million in the second quarter, or $0.02 per diluted share, compared with net income of $7 million, or $0.01 per diluted share, in second quarter 2012.
A net loss might be bad news for Amazon but it’s good news for Jeff Bezos. Sources have told me that his contract is structured to discourage turning a net profit. Whenever that happens, Bezos is required to pay back an equal amount of stock options.
I’m kidding, of course; Amazon tends to make a net profit, though it has usually been a narrow one. During this quarter last year, for example, the net profit was around half a percent of revenue. And in Q1 2013, net profit was a freakishly high 5%.
fjtorres July 25, 2013 um 7:35 pm
To Amazon stockholders, the numbers that matter are 25% sales growth year to year.
That he is growing the business at that rate and essentially breaking even means the plan is still working and Amazon is still a growth stock.
Much tooth grinding to come in the usual circles.
Somebody around here July 26, 2013 um 2:52 am
Yeah, and General Motors was the biggest carmaker when it went bankrupt.
PROFIT is the only thing that matters. Revenues are a pissing match, they only matter insofar as they lead to greater profits now or in the future. Profit, operating profit in particular, is the measure of how much net wealth the company is creating, and in Amazon’s case it’s close to zero. Yes, they create a lot of wealth – but the resources they employ are nearly as big. Output minus input.
Economists measure corporate contributions to GDP by their profit, not their revenue. Stock valuations are based on profit, not revenue.
Which leads to their 0,5% operating margin. This happens in a business that is no longer booming, 6 years after the Kindle’s release, and 19 years after Amazon’s founding.
So, yeah. Shareholders are growing impatient.
PS: and they just forecasted an operating loss for this quarter that may get to $440M. Where’s the end of this tunnel?
fjtorres July 26, 2013 um 7:40 am
Profit is the *only* thing that matters?
Not infrastructure that generates revenue today and tomorrow?
Not customer base and customer loyalty?
Not developing new products and services to bring in even more revenue?
In that case you’re looking at the wrong stock.
Amazon is in land rush mode; they see fertile ground and are fencing off as much as they can so that when the dust settles and they get down to farming the turf they’l have the scale to endure.
We are in tough economic times and yet Amazon has grown faster than the market, both retail and online, so they are actively taking share from both B&M *and* online competitors. And the losses are minimal; they can keep bleeding that way for a decade if it means further growth.
25% greater sales revenue, year to year.
It cost $7M. Out of a cash reserve of $9B. or $9000 million.
They can keep that up for quite a while. A decade or more.
The tunnel might very well go right across the earth.