Amazon’s Q3 profits skyrocket, but sales and outlook disappoint

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Amazon’s Q3 profits skyrocket, but sales and outlook disappoint

By Deena M. Amato-McCoy - 10/25/2018
Amazon’s third-quarter earnings blew past Street expectations amid surging profit from its North American retail and cloud computing businesses. But it came up short on sales and its holiday outlook.

For the quarter ended Sept. 30, Amazon’s net income increased to $2.88 billion, or $5.75 share, compared with net income of $256 million, or 52 cents per share, in the year-ago period. Analyst polled by Bloomberg had expected earnings of $3.14 per share.

Net sales jumped 29% to $56.58 billion from $43.74 billion. Analysts were looking for $57.10 billion.

North American sales were $34.3 billion, compared to $25.4 billion in the same quarter last year. International sales grew to $15.5 billion, from $13.7 billion last year. The company’s AWS cloud-computing division grew sales to $6.67 billion, compared to $4.58 billion in 2017.

Amazon said it expects fourth-quarter sales to rise between 10% and 20%, falling between $66.5 billion and $72.5 billion. Analysts had expected $73.79 billion.

A number of strategic initiatives kept the online giant busy during the third quarter. The company continued to ramp up its same-day grocery delivery and pickup services from Whole Foods Market. Free two-hour delivery through its Prime Now service is now available in Whole Foods store across 63 cities, and curbside pickup is available at Whole Foods locations in 14 cities. Both services will continue to expand into more markets throughout the rest of 2018.

The company launched Prime Book Box to all Prime members in the United States. The subscription service delivers curated children’s books every one, two, or three months for just $22.99 per box, saving Prime members up to 35% off list price.

Amazon also expanded its brick-and-mortar presence through two different brands. In September, the e-retailer opened the Amazon 4-Star, a store located in New York City’s SoHo neighborhood that only sells items that are rated four stars or above, are top sellers, or are new and trending on Amazon’s website.

It also now operates six Amazon Go locations. Three locations are located in the company’s hometown of Seattle, one in San Francisco, and two in Chicago, where two more are in the works.

In addition, the company is partnering with American Express to offer the Amazon Business American Express Card which offers flexible benefits for small businesses.

Amazon is also expanding its reach outside of retail with its acquisition of PillPack, an online pharmacy that offers pre-sorted doses of medications, home delivery, and a commitment to customer service.

Meanwhile, the company announced that it will increase its minimum wage to $15 for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees across the U.S. The wage hike goes into effect on Nov. 1.