Amazon's overseas weakness overshadows strength at home

Thu Jul 25, 2013 7:54pm EDT
 
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By Alistair Barr

SAN FRANCISCO (Reuters) - Amazon.com Inc forecast disappointing income and revenue as it grapples with a weaker international market, overshadowing improving profitability and economic conditions in the United States.

Amazon and other multinational corporations are being pressured by a declining European economy that is sapping consumer spending across the region. While North American sales jumped 30 percent in the second quarter, its international segment did not earn a profit and revenue rose 13 percent.

"International was far weaker than expected and that plays into the guidance. We're seeing weakness on the international side that the domestic business isn't able to make up," said Scott Tilghman, an analyst with B. Riley & Co.

"The European consumer has been weak. It's a tremendous opportunity for Amazon. International margins have been constrained. If they can get to 5 percent profit margins or more, that's tremendous operating leverage. But you need the macro environment to be better."

Amazon shares fell 2.8 percent to $294.95 in after-hours trade. The stock hit a record of $309.39 on July 16.

After the bell on Thursday, the company reported a second-quarter net loss of $7 million or 2 cents a share, compared to a profit of $7 million or a penny a share a year earlier. Revenue in the latest quarter was $15.7 billion.

The largest Internet retailer had been expected to earn 5 cents a share on $15.73 billion in revenue in the latest quarter, according to Thomson Reuters I/B/E/S.

(See graphic link: link.reuters.com/qur89t)   Continued...

 
A zoomed illustration image of a man looking at a computer monitor showing the logo of Amazon is seen in Vienna November 26, 2012. REUTERS/Leonhard Foeger