Houston, TX – (StockNewsDesk) – 10/25/2014 — One of the world’s largest e-commerce corporations, Amazon, an inspiring model for many, today is in doldrums. The company has reported its biggest quarterly loss, $40 million, in the last decade. Blame it on the financial projections or strategies or pricing, neither of them are churning profits for the company. Profits and revenues of all the quarters were amiss. The share price of the company posted its biggest loss of 8.3% since July. In 2014, S&P 500 indexes have risen 6.3%; however, Amazon stock has declined by a huge 28%. The main question is, why is Amazon experiencing such huge losses despite having a presence in most of the developed and developing countries?
If the company continues to grow at the same speed, share price of the company might also fall to the level it reached during the crash of 2008. Margins have played a very important role for Amazon. The company has ventured into all sorts of business, infusing heavy capital; however, very low margins have been kept as a result of which profitability of the company dipped. This is one of the main reasons Alibaba overtook Amazon as the most valid e-commerce company. Alibaba makes healthy profits.
The company has projected lower profits and lower revenue at the same time the employee count has increased from 110,000 last year to 149,500, up 35%. This has a negative impact on the company’s profitability. Additionally, projections decreased because of the strength in the US Dollar. The holiday season is approaching; hence, investors who bought shares of the company at $300 a share expected improvement in the margins. However, they received the opposite. For the third quarter, Amazon reported a loss in excess of $400 million, ten times higher than the earlier year’s loss. However, sales figures remained marginally in line at $20 billion. This shows that margins are not being managed properly.
Huge Spender of Money
On an average, Amazon’s spending has increased 20% year over year. This year, Amazon’s spending has increased to $21.1 billion, which coincidentally is the approximate figure of the revenue. The month of December usually rakes money for Amazon. This year, the company has planned to hire 80,000 part-timers compared to earlier year’s 70,000. In the United Kingdom, the company plans to hire 13,000 part-time workers. This will add more cost to the company’s balance sheet.
Amazon has already said that the company will spend $2 billion in India, one of the hotbeds for e-commerce. With the festive season coming in the next two months, there is hope Amazon recovers from its losses. With increasing costs, lower margins and lower profits, sentiment is turning low for the company.