Who will win the Walmart Amazon Race

Amazon's delivery race with Walmart weighs on profit

Amazon is accepting a drop in profits for investing in faster deliveries. The world's largest online retailer posted a profit below expectations on Thursday after the market closed for the first time in two years and announced that it would also accept discounts in the current quarter.

Brian Olsavsky, chief financial officer, said they spent a little more than the announced $ 800 million in the second fiscal quarter to accelerate the supply chain. Amazon wants to make deliveries within 24 hours the standard for customers of its "Prime" service - first in North America and then worldwide. For this logistical feat of strength, however, high investments are first required. The Internet group is facing increasing competition from Walmart, for example, which advertises deliveries in two days without paying membership.

forecast

For the second quarter, Amazon announced a fifth increase in sales of 63.4 billion dollars. The bottom line was that the group earned $ 2.6 billion after $ 2.5 billion in the same period last year. Experts had expected $ 2.8 billion. In the case of the AWS cloud service, growth slowed somewhat: sales rose by 37 percent to $ 8.4 billion. Since 2015, the Internet services division has regularly recorded growth rates of more than 40 percent.

For the current third quarter, Amazon expects an operating profit of between 2.1 and 3.2 billion dollars - according to surveys by FactSet, however, analysts have so far assumed 4.4 billion dollars. For comparison: In the same period last year, the profit was $ 3.7 billion. In terms of sales, Amazon is aiming for an increase to between $ 66 billion and $ 70 billion in the current quarter.

The Amazon share initially fell by about two percent in after-hours trading. In the past, the group has repeatedly left short-term profits behind in its endeavor to dominate markets over the long term. Like other US technology companies, Amazon is attracting increasingly critical looks from regulators and politicians. (Reuters, July 26, 2019)