Worried analysts question Amazon's logistics plans

Fri Jan 29, 2016 7:12am EST
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By Mari Saito

SAN FRANCISCO (Reuters) - In the wake of Amazon.com Inc's disappointing financial results that sent shares plunging Thursday, analysts blamed rising costs to deliver goods, which increased to $4.5 billion in the quarter, up 24.4 percent from the same quarter last year.

And they sharply questioned the company's plans to continue to make heavy investments in logistics, even at the expense of profits.

They wondered why it was planning to buy more assets like trucks, and reportedly to lease jets, and worried it planned to spend the money to take on shippers like United Parcel Service Inc.

"The so-called (earnings) miss was half fulfillment and half marketing," said Michael Pachter, a managing director of equity research at Wedbush Securities.

The growing popularity of Prime, which promises free, two-day deliveries for millions of online orders, was one of the factors driving up shipping costs at the online retailer.

Rising shipping costs are of particular concern to Amazon, which is the world's largest online retailer.

To handle increased orders and speed up delivery, Amazon has opened more warehouses and is building its own delivery system.

But Amazon executives asserted on Thursday that they do not intend to compete against carriers like United Parcel Service and FedEx Corp.   Continued...

Amazon boxes are organized to be delivered in New York July 24, 2015. REUTERS/Eduardo Munoz