Amazon Stock Plunges in After-Hours Trading on Disappointing Earnings

Amazon.com Inc.’s stock plunged as much as 9% in Thursday after-hours trading following a disappointing earnings report that saw the e-tail giant’s profits take a hit for the first time in more than two years.

For the third-quarter ended Sept. 30, the Seattle-based firm posted earnings of $4.23 per diluted share, while Wall Street had predicted earnings per share of $4.62. Income decreased to $2.1 billion compared to $2.9 billion for the same period a year ago. It was the first year-over-year decline in Amazon’s earnings since June 2017.

On the other hand, sales rose 24% to $69.9 billion in Q3 versus $56.6 billion during the same period in 2018. Comparatively, analysts had estimated revenues of $68.8 billion.

As of 5:00 p.m. ET, the retailer’s shares were down 6.5% to $1,665.00.

Last quarter, Amazon’s streak of record-high earnings hit a snag, as executives noted that its profitability was hit by higher shipping costs, particularly the recently rolled out one-day Prime shipping service.

The company announced in April the switch from two-day delivery to one day for Prime members at no additional charge. It had estimated logistical costs of $800 million to support the single-day shipping program, but in its Q2 call with analysts, the online giant said it had spent “a little bit higher than that number in total cost,” as global shipping expenses climbed 36% during the quarter.

In a statement today, Amazon founder and CEO Jeff Bezos continued to back the initiative: “We are ramping up to make our 25th holiday season the best ever for Prime customers, with millions of products available for free one-day delivery. Customers love the transition of Prime from two days to one day. They’ve already ordered billions of items with free one-day delivery this year. It’s a big investment, and it’s the right long-term decision for customers.”

He added that “although it’s counterintuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfillment centers very close to the customer. It simply becomes impractical to use air or long ground routes.”

Other highlights during the quarter included the launch of Personal Shopper by Prime Wardrobe, which allows members to order a package of personalized clothing, shoes and accessories in a box sent directly to their doors every month. It marks Amazon’s latest move to capture a new generation of customers, who are increasingly favoring quicker and more convenient alternatives to brick-and-mortar shopping.

The retailer has also been making investments in its workforce, hosting Career Day events in an effort to hire 30,000 permanent workers for its headquarters, data centers, retail stores and customer fulfillment networks in the United States. All candidates are offered access to on-the-job training as part of Amazon’s $700 million commitment to help workers navigate into more highly skilled positions or even pursue professions outside the company.

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