Amazon's sales prospects are weak after a record holiday quarter By Reuters

By Jeffrey Dastin and Arjun Panchadar

(Reuters) – Amazon.com Inc. (NASDAQ) on Thursday announced lower sales than Wall Street estimates for the first quarter, warning that the new regulations in India had created uncertainty around one of its major markets. growth and announcing increased investment in 2019.

Shares of the company fell 5% to $ 1,635 after the bell.

The outlook has overshadowed Amazon's record sales and profits during the holiday season. Fast, free delivery has helped the world's largest online retailer increase revenues by 20%. A lucrative cloud computing company, along with fees that merchants pay to Amazon to ship and advertise their products, has boosted the company's extremely thin profit margin.

Net profit jumped 63% to $ 3 billion in the fourth quarter, ahead of badysts' estimates.

Still, investors have focused their attention on Amazon's international operations, where the company has long been losing money in the hope of making future profits. Although its international operating loss fell to $ 642 million in the quarter from $ 919 million a year ago, the new Indian regulations are poised to wreak havoc. The rules are designed to protect local businesses by prohibiting foreign online businesses from selling products through suppliers in which they have an interest.

Brian Olsavsky, Amazon's chief financial officer, said in a phone conversation with reporters that "the situation in India is a little fluid right now."

The company began Thursday to remove a wide range of products from its website in India on Thursday to comply with new foreign investment restrictions that came into effect on Feb. 1, Reuters reported.

Mr Olsavsky nevertheless said: "India remains a good long-term opportunity".

Colin Sebastian, an badyst at Baird Equity Research, said: "The problems in India are weighing on the outlook for the first quarter, although growth is slowing overall in the domestic market." That's not a bad thing, but there's has enough issues to be under pressure. "

HIGHER EXPENDITURES

According to Refinitiv's IBES data, the company expects net sales of between $ 56 billion and $ 60 billion for the first quarter, without the estimated average estimate of $ 60.77 billion from badysts.

Forecasts include two percentage points of the negative impact of changes in exchange rates.

Olsavsky said the investments would increase this year. The company had little need to splurge in 2018 thanks to the previous spending in warehouses, workforce and other areas, which allowed to increase profits. But this year, investments will increase, although Mr Olsavsky has not specified where and how much.

"As a result, the profitability of '19 may not be as good as it was in '18," said Tom Forte, an badyst at D.A. Davidson, adding that this might not be a bad thing.

"If they walk on the accelerator, it means that they like what they see and that it is worth it to invest more," he said.

The operating profit forecast by Amazon will be between $ 2.3 billion and $ 3.3 billion this quarter, compared with $ 1.9 billion a year earlier.

Much of the company's hiring has been outsourced to Amazon Web Services, its lucrative business selling cloud storage, storage and storage. Revenues for this unit jumped 45.3% to $ 7.43 billion, exceeding the average estimate of $ 7.26 billion.

Total net sales for the fourth quarter were $ 72.38 billion and exceeded the average estimate of $ 71.87 billion from badysts, thanks to a successful holiday season, which includes the Big Black Friday US buy event.

The results show that Amazon has continued its "incessant onslaught" against Christmas at other retailers, Nicholas Hyett, equity badyst at Hargreaves Lansdown (LON :), said.

According to Amazon, tens of millions of customers have signed up for its premium loyalty club over the course of the season – more than in previous quarters – helping to boost subscription fee revenue by 25 percent. $ 4.0 billion. The company said last year that it had more than 100 million Prime members worldwide.

This large customer base has encouraged merchants to sell products in the company's market, to the point that more than half of the products sold on Amazon come from third parties.

Making the sale of Amazon even more profitable is selling ads. The company is now listed alongside Google and Alphabet (NASDAQ 🙂 Inc. Facebook Inc (NASDAQ 🙂 as marketing titans, letting these same merchants pay for a high placement in Amazon's search results.

Ad sales and "other" revenues jumped 95% to $ 3.4 billion in the fourth quarter.