Amazon warns of possible loss, mulls Prime fee-hike

Thu Jan 30, 2014 7:30pm EST
 
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By Bill Rigby and Edwin Chan

SEATTLE (Reuters) - Amazon.com Inc missed Wall Street's estimates for the crucial holiday period and cautioned investors about a possible operating loss this quarter as shipping costs climb, pushing its shares down more than 5 percent.

The world's largest online retailer faced lofty expectations going into one of the most heavily competitive holiday seasons in years, with retailers vying to out-do each other with steep discounts. It was a contest that many retail industry executives have blamed on Amazon.

The Seattle-based company, which has spent freely to forge new markets in cloud computing and digital media, is experiencing slower growth at home after years of rip-roaring expansion, and its international business continues to underperform.

Amazon expects operating results for the current quarter to range from a $200 million loss to a $200 million profit, compared with a $181 million profit a year ago.

To cover rising fuel and transport costs, the company is considering a $20 to $40 increase in the annual $79 fee it charges users of its "Prime" two-day shipping and online media service, considered instrumental to driving online purchases of both goods and digital media.

Amazon has been trying to sustain its pace of growth by investing heavily in retail and distribution networks across the globe, while expanding into the technology realm with Kindle digital devices, cloud computing services and online media.

That has taken a toll on its bottom line. With revenue growth slowing as Amazon achieves unprecedented scale, analysts said investors may be getting impatient.

"Amazon's gotten so many hall passes on earnings," said Colin Gillis, an analyst at BGC Financial, adding that pressure on the company to produce profit is now rising. "Perhaps the market expectations for them to deliver income, as their revenue growth slows" is increasing, said Gillis.   Continued...

 
A zoomed image of a computer screen showing the Amazon logo is seen in Vienna November 26, 2012. REUTERS/Heinz-Peter Bader