October 25, 2004

At Amazon, sales shoot up, but profits don't, and stocks tumble to the lowest point in a year as a result . . .


Officials at Amazon.com were crowing last week at the announcement that the company had tripled its pro-forma profits for the third quarter, but as Melanthia Mitchell reports in an Associated Press wire story, shares of Amazon’s stock nonetheless “dropped to a 52-week low” late Friday, the day after the announcement. Why? The numbers were short of the numbers Wall Street expected due to Amazon’s drastic discounts, which are keeping profits down despite the increased sales. Mitchell’s distinction that Amazon’s accounting of “pro-forma” profites, “which exclude stock-based compensation, operating expenses and other items,” also points out a significant problem with the numbers. In short, says one analyst, “Investment in their infrastructure and technology, and lighter sales than expected, kind of contributed to it all.”

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives