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Amazon Q4 estimates lower than expected, shares drop 9%

Shares in Amazon dropped by as much as 9% in after-hours trading on Thursday (25 October) after it said revenue growth for its fourth quarter would be below analyst estimates at 10-20%.

Net sales are expected to be between $66.5 billion and $72.5 billion, with what the company described as an expected unfavourable impact of approximately 80 basis points from foreign exchange rates.

Operating income for the business, which is listed on the Nasdaq American stock exchange, is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in the fourth quarter of 2017.

The estimates came as Amazon announced third-quarter net sales for the three months to 30 September 2018 of $56.6 billion – a jump of 29% year on year. Operating income grew to $3.7 billion, which was up from $347 million reported in the third quarter of 2017.

Net income increased to $2.9 billion in the third quarter, compared to $256 million one year before.

Each quarter Amazon lists business highlights for the three-month period, with UK-related news for the third quarter including the introduction of Amazon Storefronts which gives customers an opportunity to shop online for over one million products exclusively from small and medium-sized businesses selling on Amazon. The feature is also available in the US and Germany.

Other notable moves during the recent quarter include the addition of several new Amazon Go stores in the US, bringing the number of no-checkout-shops which use Amazon’s patented Just Walk Out Technology to six. The stores operate using what Amazon describes as “a combination of computer vision, sensor fusion, and deep learning”.

Quarter three also saw the launch of Amazon 4-star in New York City, a physical store that carries a highly-curated selection of products from the top categories across Amazon.com. All products merchandised in the store are rated 4 stars and above, are a top seller, or are new and trending on Amazon.com.

Market intelligence group eMarketer Retail predicts Amazon’s worldwide eCommerce revenue will grow by more than 28% this year to reach $394.23 billion. In the US, Amazon has 49.1% of all eCommerce spending and 4.9% of all retail spending online and offline, according to the analyst.

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