(Reuters) – Amazon.comAMZN.O) Forecast sales revenue and holiday season profits, which missed Wall Street targets on Thursday, projected revenue growth that would be the slowest in years, sending shares of the world's largest online retailer down 8 percent in after-hours trading.
Amazon sales in the third quarter lagged behind estimates. Analysts said the international results are disappointing and online competition is increasing. The company blamed accounting changes and warned that its outlook was conservative.
For years, Amazon has been making expensive bets on new technologies and programs, such as the $ 13.7 billion Whole Foods takeover in 2017, to oust the US food industry. This has led to roller coaster profits in the past, but revenue has grown at a breakneck pace for the most part as consumers shifted shopping online and away from in-store business.
"Weak sales growth remained like a wild thumb," said George Salmon, an analyst at Hargreaves Lansdown. "And if you trade at 70 times the expected profit, it does not take much to shake the stock price."
Amazon's more muted expectations for this year's Christmas season, which runs from Thanksgiving holidays in the US from late November to New Year, were a special surprise. It forecasts fourth quarter revenue to grow between 10 percent and 20 percent, or up to $ 72.5 billion, while analysts expect $ 73.9 billion, according to Refinitive data.
That would be the least quarterly growth of Amazon since at least the beginning of 2016. In the last four quarters, sales rose between 29 percent and 43 percent.
Brian Olsavsky, Amazon's chief financial officer, said the fundamentals have not changed, just a few holidays in India and accounting differences.
"We expect a strong holiday season, so there's no news on our forward line against it," he said in a conference call with the media. "We have everything ready to roll."
The company has postponed the $ 300 million recording of Prime Subscriptions from the fourth quarter to earlier periods of the year, he said. In addition, Amazon faces a more difficult year-over-year comparison, as the Whole Foods contract was closed in the third quarter of 2017 and the divergent timing of Diwali's holiday impacted sales patterns.
"Amazon has seen a significant slowdown in its international division, trying everything investors were unwilling to do," said Chaim Siegel, an analyst at Elazar Advisors.
Amazon forecasts $ 2.1- $ 3.6 billion in operating income in the fourth quarter, down from $ 3.87 billion expected by analysts, according to FactSet.
Neil Saunders, General Manager of GlobalData Retail, said the results reflected a changing landscape in which retailers allegedly opposed Amazon.
"Others are better at gnawing at their dominance now," he said, quoting Walmart (WMT.N), Target TFT.N and Macy's (M.N).
WINS AND GOODS THIRD
Despite the slower sales growth, Amazon has become steadily more profitable.
Net income for the third quarter increased from $ 256 million, or 52 cents a share, the previous year to $ 2.88 billion, or $ 5.75 per share.
Up to 53 percent of the goods sold today on Amazon come from third-party vendors, the company said on Thursday. This moves away from the traditional trade in which Amazon is the seller of a product.
This means that the company incurs less revenue but makes a lucrative contribution to the sales of others – all the more profitable if the merchants pay Amazon to cope with their delivery. Seller services increased 31 percent to $ 10.4 billion in the third quarter.
"They do not care if they sell us their own goods or third-party goods, so they should not be penalized for the latter," said Michael Pachter, an analyst at Wedbush Securities.
More and more sellers are also looking to Amazon to market their products – another highly profitable business. Amazon is targeted at advertisers because users generally use the site for shopping, unlike users using Alphabets Inc (GOOGL.O) Google, the ad sales manager, for general information or rival Facebook Inc (FB.O) to see updates from their friends.
Amazon said revenue from the category and some other products rose 122 percent to $ 2.5 billion in the third quarter. Analysts expected $ 2.4 billion, according to refinancing data.
Olsavsky, the CFO, also said that the company is working more efficiently, hiring less than in the past and adding less storage space.
"We were able to reduce in a number of key areas," Olsavsky told reporters and cited cost improvements for cloud unit Amazon Web Services.
The world's highest-volume cloud business saw revenue grow 45.7 percent to $ 6.68 billion, just over $ 6.67 billion.
Reporting by Jeffrey Dastin in San Francisco and Arjun Panchadar in Bangalore; Edited by Leslie Adler