(Reuters) – Amazon.com Inc. ( AMZN.O ) forecast holiday season sales and profits that lost Wall Street targets on Thursday, project revenue growth that would be the slowest years, sending stocks of the world's largest Online store reduces 8 percent in after-trade.
Amazon sales in the third quarter also disappeared. Analysts said international results were disappointing and competition on the internet increased. The company blamed accounting changes and warned that it was conservative with its prospects.
For years, Amazon has made great efforts on new technologies and programs, such as its $ 13.7 billion purchase of Whole Foods in 201[ads1]7 to storm the American grocery industry. This has resulted in profits on the runway, but revenue has grown to a great extent at a breakneck pace when consumers switched online and away from brick and mortar.
"Weak income growth staggered like a sore thumb," says George Salmon, analyst at Hargreaves Lansdown. "And when you trade on 70 times your expected earnings, it does not take much to happen the stock price."
Amazon's more bad expectations for this year's holiday season, starting from US Thanksgiving holidays in late November through New Year, were a special surprise. It predicts that sales in the fourth quarter will increase between 10 percent and 20 percent, or up to 72.5 billion dollars, while analysts expect $ 73.9 billion, according to Refinitive data.
It would be Amazon's lowest quarterly sales growth since at least the beginning of 2016. In the last four quarters, sales increased between 29 percent and 43 percent.
Brian Olsavsky, Amazon's chief financial director, said that no fundamental changes were changed, just some vacation listings in India and accounting differences.
"We expect a strong holiday season so there is no message in our further guidance on it, "he said at a conference call with the media. "We are all ready to roll."
The company moved the $ 300 million record in Prime subscription revenues from the fourth quarter to earlier periods of the year, he said. In addition, Amazon faces a tougher comparison this year, compared to the fact that the Whole Foods agreement closed in the third quarter of 2017, and the different timing of the holiday Diwali affected sales patterns, he said.
"Amazon saw a meaningful decline in their international division. They had hit all cylinders so that some investors were not ready," said Chaim Siegel, analyst at Elazar Advisors.
Amazon estimates fourth quarter operating results between $ 2.1 billion and $ 3.6 billion, under $ 3.87 billion, is expected by analysts, according to FactSet.
Neil Saunders, CEO of GlobalData Retail, said the results reflect a changing landscape with Amazon dealers
"Others are now better off nibbling away from their dominance," he said, saying Walmart ( WMT.N ), Target TFT.N and Macy's ( MN ]
Profits and Third Party Items
Despite lower sales growth, Amazon has increasingly become more profitable.
Net profit for the third quarter rose to 2.88 billion dollar, or $ 5.75 per share, fr a $ 256 million, or 52 cents per share, the year before.
Up to 53 percent of the items sold on Amazon now come from third party sellers, the company said on Thursday, marking a steady shift from traditional retail stores where Amazon is selling a product.
This means that the company collects fewer revenues but takes a lucrative cut of others' sales – even more profitable when sellers pay Amazon to handle the freight. Sales services grew 31 percent to $ 10.4 billion in the third quarter.
"They are indifferent if they sell their own goods or third-party goods so they should not be penalized for the latter," said Michael Pachter, analyst at Wedbush Securities.
More sellers look to Amazon to market their products too – another highly profitable business. Amazon appeals to advertisers because people generally use the site to act, unlike users who read Alphabet Incs ( GOOGL.O ) Google Advertising Merchant, to find general information or competitor Facebook Inc ( FB .O ) to see updates from their friends.
Amazon said revenue from the category and some other items grew 122 percent to 2.5 billion dollars in the third quarter. Analysts expect $ 2.4 billion, according to Refinitive data.
Olsavsky, CFO, also said that the company operates more efficiently, hiring less than previously and adding less storage space.
"We have really been able to cut down on a number of important areas," said Olsavsky to reporter and cited cost enhancements for the Amazon Web Services cloud unit as well.
World No.1 Cloud business by revenue increased sales of 45.7 percent to $ 668 million, which narrowed with previous estimates of 6.67 billion dollars.
Reporting Jeffrey Dastin in San Francisco and Arjun Panchadar in Bengaluru; Editing Leslie Adler