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On Strong Earnings, Amazon And Whole Foods Face Culture Clash

28 October 2017

Shares of (NASDAQ: AMZN) soared in Friday's trading session, boosted by a great third-quarter earnings report.

Amazon's net income for the quarter was $256 million, up from $252 million in the year-ago quarter.

The company reported revenue of $43.7 billion, up 34%, helped by $1.3 billion in sales at Whole Foods.

O'Shea also noted revenue growth and operating income at AWS "more than offset" the loss Amazon took on through investments in its worldwide business. Without these sales, revenue increased 29% year over year to $42.4 billion.

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Amazon gave fourth quarter guidance in the range of $56.0 billion and $60.5 billion, right in-line with street estimates of $58.9 billion. By comparison, Amazon's most recent quarter ended on September 30, indicating that Whole Foods' revenues have not changed drastically under Amazon's control. Here's what to expect from the king of e-commerce.

Amazon's expansion into new sectors and markets has lifted the company's share price and made Bezos one of the world's richest individuals - briefly the richest at one point, according to one survey.

He called the growth in service sales along with Amazon's 59% year-over-year growth in subscription services in Q3 a positive, being more predictable sources of revenue. Along with AWS, Business Prime Shipping gives Amazon another service offering for the growing B2B e-Commerce market. In the fourth quarter of 2016, Amazon had $43.7 billion worth of sales, meaning that it expects an increase of 28% to 38%. GlobalData Retail's Saunders said his firm sees Prime "as a critical tool to extend Amazon's customer reach, gather customer data, and to lock in loyalty in an increasingly fickle marketplace".

"And it's working, customers have purchased tens of millions of Alexa-enabled devices, given Echo devices over 100,000 5-star reviews, and active customers are up more than 5x since the same time past year".

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This is good news given that Amazon just rolled out an array of new Alexa-enabled devices just before the holiday season. The launch of new services like Amazon's unlimited music service in several European countries, and the rollout of Alexa services to India and Japan, have all taken their toll on the cost line.

As discovered by the website while using an Amazon Echo Show, the Jeopardy skill - based on the TV quiz show of the same name - has started offering a subscription model where users pay $1.99 per month to gain six extra clues each month.

In its release, Amazon vowed to continue the downward pressure on prices at often-pricey Whole Foods, saying "the two companies together will pursue the vision of making high-quality, natural and organic food affordable to everyone".

Amazon now pays developers out of its own pocket to create the skills, which Echo users are then able to download and install onto their Alexa at no charge.

Economic growth strengthens in third quarter to growth of 0.4%
The eurozone's growth rate also caught up with the United Kingdom in 2016, and has outpaced the United Kingdom so far this year. On a yearly basis, economic growth held steady at 1.5 percent in the third quarter, which was in line with expectations.

On Strong Earnings, Amazon And Whole Foods Face Culture Clash