In this file:
· Weak Amazon Outlook Sinks the Market
· Amazon's earnings included a negative number, but the company said it doesn't matter
· Jeff Bezos' 'change of heart' on advertising turned Amazon into the No. 5 spender in the US
· Amazon has another ‘Prime’ holiday: Profit tops $3 billion
Weak Amazon Outlook Sinks the Market
The FAANG stocks giveth and they taketh away.
Andrew Osterland, Guest Writer, Entrepreneur
February 1, 2019
Opinions expressed by Entrepreneur contributors are their own.
Yesterday, great earnings from Facebook lifted the entire technology sector. Today, a cautious outlook from Amazon.com deflated it.
The online retailing/cloud computing/video streaming/grocery distribution giant handily beat estimates for the fourth quarter but gave a slightly less upbeat outlook for the coming quarter than analysts were expecting. The stock fell 5.35 percent, the biggest decline on the Entrepreneur Index™ today.
Amazon is now back in bear market territory, down more than 20 percent from its high set in early September. It remains, however, the most valuable public company (worth $795 billion) by a slight margin over Apple and Microsoft.
The rest of the technology sector had mixed results today. The tech-heavy Nasdaq Composite index fell 0.25 percent while the Dow and S&P 500 indexes were up 0.26 percent and 0.09 percent respectively. The Entrepreneur Index™ was down 0.89 percent on the day.
The stock market was not particularly impressed with strong January jobs data released this morning. The economy added 304,000 new jobs versus expectations of 170,000. That's often good news for corporate sales, profits and stock prices, but it may have also renewed fears of another interest rate hike from the Fed this year...
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Amazon's earnings included a negative number, but the company said it doesn't matter
· Amazon's fourth-quarter earnings release included a physical-store sales number that confused some observers.
· Sales were down 3% compared to the year prior, which included most Whole Foods sales.
· Amazon explained that last year's fourth quarter had five additional days of sales. Plus, Amazon has moved Whole Foods sales that start online — for delivery via Prime Now, for example — to its online stores category.
· It remains to be seen how sales from physical stores will fit into Amazon's broader strategy.
Dennis Green, Business Insider
Feb 2, 2019
One stat in Amazon's fourth-quarter earnings reported raised some eyebrows.
It reported a 3% decrease in sales from physical stores compared to the same quarter a year prior. That appears significant, as this was the first year-over-year comparison Amazon had reported for Whole Foods since it acquired the grocery chain in 2017.
Amazon executives threw cold water on any speculation about a decline in sales at Whole Foods during the earnings call with analysts, however.
CFO Brian Olsavsky said the decline was mostly due to an accounting change. In the fourth quarter of last year, Amazon lined up Whole Foods' fiscal calendar with its own, resulting in five extra days of revenue in the fourth quarter of 2017.
Amazon also launched its Whole Foods grocery pickup and delivery services — which it offers through Prime Now — to cities across the country throughout 2018. Those sales are counted in Amazon's online revenue instead of with its physical store sales.
Adjusting for those two factors, Whole Foods sales are up 6% year over year, Olsavsky said during the call with investors.
That does leave the rest of Amazon's physical store initiatives, including Amazon Books, without any reliable way to discern sales growth or lack thereof. It'll be a while before we get any hard data on Amazon's fleet of Go or 4-star stores, both of which rapidly expanded in 2018 and are poised to grow further in 2019.
It also means...
Jeff Bezos' 'change of heart' on advertising turned Amazon into the No. 5 spender in the US
Bezos admitted to changing his mind about ads during the company's all-hands staff meeting in November.
Amazon bolstered ad spending by 72.5 percent in 2018, the biggest increase among the top 10 advertisers.
The company bought up more than $1.8 billion worth of ads, according to Kantar Media.
Eugene Kim, CNBC
Feb 2, 2019
If it seems like you're seeing Amazon ads all over the place, there's a reason why: Jeff Bezos no longer hates them.
Amazon's CEO once famously said ads are "the price you pay when your product is unremarkable." But during the company's internal all-hands meeting in November, an employee asked the CEO if he's had a "change of heart" on buying ads for Amazon's own products.
"Yes, I changed my mind," Bezos said with a laugh during the meeting, a recording of which was shared with CNBC.
The company's promotion of everything from its Echo devices to Amazon Web Services led to a 72.5 percent increase in U.S. ad spending last year to $1.8 billion, according to Kantar Media, which tracks TV, digital, outdoor billboards and other platforms, but not social media. That pushed Amazon into the fifth spot among U.S. advertisers and represented by far the biggest increase among the top 10 companies. Amazon didn't even make the top 20 until 2015.
Bezos' about-face on advertising reflects the dramatic change in Amazon's business, which is no longer predominantly an e-commerce marketplace. While most of its revenue still comes from online sales, Amazon now has a whole portfolio of branded products and services that consumers and businesses need to see on TV ads and elsewhere. The four companies ahead of Amazon are Procter & Gamble, AT&T, Berkshire Hathaway (owner of brands including Geico, Kraft Heinz and Fruit of the Loom) and Comcast.
During Sunday's Super Bowl between the New England Patriots and Los Angeles Rams, Amazon will be airing ads for the fourth straight year. Each 30-second spot costs a record $5.25 million this year, and Amazon is expected to run multiple ads during the game.
Those costs are showing up on Amazon's financial results. In its most recent earnings statement this week, Amazon reported a record $13.8 billion marketing expense for 2018, up 37 percent from the prior year. That accounted for 5.9 percent of Amazon's total revenue, the highest ratio in 18 years. Within its marketing budget, "advertising and other promotional costs," which includes referrals commissions, accounted for $8.2 billion, up from $6.3 billion in 2017, it said.
Amazon disclosed in its regulatory filing that the growth in costs was primarily related to increased hiring of marketing and sales people, as well as more spending on "online marketing channels."
`Spend heavily' ...
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Amazon has another ‘Prime’ holiday: Profit tops $3 billion
By Joseph Pisani, Associated Press
via Hartford Courant - Feb 01, 2019
Amazon had another strong holiday season: Its quarterly profit topped $3 billion for the first time as revenue grew across many of its businesses, including online shopping, advertising and cloud computing.
The company, however, issued an estimate for the current quarter's revenue that was below what Wall Street analysts expected, sending its stock down about 5 percent in after-hours trading Thursday.
Amazon executives attributed the softness in this quarter to uncertainty about how new e-commerce rules in India could hurt sales in that country. They also said the company's costs may increase this year from last year, as it spends on hiring, warehouse construction and other investments.
Amazon, which recently surpassed Microsoft as the most valuable company in the U.S., reported net income of $3.03 billion during the last three months of 2018. On a per share basis, it had earnings of $6.04, beating the $5.55 per share analysts expected, according to Zacks Investment Research.
Revenue rose 20 percent to $72.38 billion, which also beat expectations.
The Seattle-based company has boosted its profits in recent quarters as it expanded into businesses beyond online shopping. Its Amazon Web Services unit, which provides cloud computing services to governments and companies, has become a big moneymaker, helping to offset the high costs of the retail business. Sales in the web services unit grew 45 percent in the quarter.
Its advertising division is now a multi-billion dollar business...