Amazon Spending For Faster Delivery Slices Profit

The spending binge isn’t over. Amazon Chief Financial Officer Brian Olsavsky said Thursday that the costs of the company’s one-day delivery push will total some $1.5 billion during the holiday quarter. Amazon’s projections for operating income and sales in the period fell short of analysts’ estimates, and shares slumped as much as 9.1 percent in extended trading.

Amazon Chief Executive Officer Jeff Bezos has promised since the company’s initial public offering to invest for the long haul, and he is proving again his willingness to endure a little short-term pain in a bid to expand. Facing slowing growth in its core e-commerce franchise in recent years, Amazon in April announced an initiative to cut the delivery window on millions of items for paying members of its Prime subscription program. That’s helped reinvigorate sales, if at a high price.

“Customers love the transition of Prime from two days to one day—they’ve already ordered billions of items with free one-day delivery this year,” Bezos said in a statement. “It’s a big investment, and it’s the right long-term decision for customers.”

The investments taking place across Amazon’s warehouses are “strategically necessary,” agreed Charlie O’Shea, an analyst at Moody’s Investors Service, but they “continued to weigh heavily” on the profitability of the retail business…[Read More]