Amazon’s profit falls as costs for faster shipping soar

NEW YORK (AP) — Amazon’s push for faster delivery is hurting its profits. The online retailer said its third-quarter net income fell 26 per cent from a year ago, missing Wall Street expectations. Its sales outlook for the holiday shopping season also disappointed analysts, and its stock sank seven per cent in after-hours trading.

Amazon is moving to cut its delivery time in half to one day instead of two. To do that, it’s adding more workers in its warehouses and expanding its shipping network with more trucks, jets and package sorting facilities.

The effort is costing the company about USD1.5 billion, nearly double what it previously said it would cost. But Amazon said the one-day shipping is attracting more customers and gets shoppers to spend more.

“It’s a big investment,” said Amazon CEO Jeff Bezos, in a statement. “And it’s the right long-term decision for customers.”

The Seattle-based company reported net income of USD2.1 billion in the three months ending September 30, down from USD2.9 billion a year ago. Earnings per share came to USD4.23.

That’s 36 cents less than what analysts expected, according to FactSet.

The company, which used to report razor-thin profits, has seen its quarterly profits grow in the past two years as it expanded into fast-growing businesses, such as cloud computing and advertising.

Sales at its cloud computing business, which powers video-streaming service Netflix and other companies, rose 35 per cent from a year ago. And revenue in its “other” category, which the company said is mostly made up of its advertising business, jumped 44 per cent.

But as Amazon grows it faces increasing scrutiny from regulators.