Amazon Sales Soar But They Deliver a Tiny Profit

Apr 25, 2014 9:11am

Morning Money Memo…

AP amazon kab 140425 16x9 608 Amazon Sales Soar But They Deliver a Tiny Profit

An office building occupied by Amazon.com is pictured in Sunnyvale, Calif. on Jan. 1, 2014. Kris Tripplaar/AP Photo

Earnings season is all about the bottom line, except if you’re Amazon. The retail and entertainment giant reported blow-out sales, but tiny profits. First quarter revenues were $19.74 billion – up 23 percent on the year before. Earnings were a tiny percentage of overall sales and fell 19 percent to $146 million. Amazon executives emphasize growth and investment in future projects. “We are pleased with the overall fundamentals,” Tom Szkutak, Amazon’s chief financial officer told reporters. “A lot of areas contributed to growth.” Apart from its huge retail business, Amazon is looking to its cloud computing division, Kindle devices and streaming entertainment to boost future revenues.

Amazon was stung by the rising cost of shipping. The Wall Street Journal reports that Amazon has started is its own delivery operation and could one day compete against FedEx and UPS. Test runs are said to have been made with trucks doing drop-offs in several cities, including San Francisco and New York. “Delivering its own packages will give Amazon, stung by Christmas shipping delays, more control over the shopping experience,” says the Journal.

Ford Motor Company’s first-quarter profit fell 39 percent. Sales and revenue declined in North America, its most important market. Ford’s worldwide revenues were up 6 percent, helped by strong sales in China and other parts of Asia.

The financial costs are getting higher for Russia as the Ukraine crisis continues. The Standard & Poor’s credit agency cut Russia’s credit rating today for the first time in more than five years. The ratings agency’s main concerns are the flight of capital and the risk to investment in Russia since the Ukraine crisis blew up. Credit ratings are important for the economy because they determine how expensive it will be for a country or company to borrow. Russia’s Central Bank raised a key interest rate to 7.5 percent in response to the crisis. Higher rates could reduce inflation and stop the Russian currency from sliding in value.

American manufacturers are now more competitive, says a new study from the Boston Consulting Group. Rapidly rising wages and higher energy costs in China have reduced the gap. The U.S. is now more competitive compared to factories in most major economies than it was ten years ago. That’s important because the trend may lead to more factories being built in this country instead of overseas

U.S. and Japanese trade negotiators held round the clock talks on the Trans Pacific partnership during the president’s visit to Tokyo. American officials say the two sides have narrowed differences on market access issues related to agriculture and automobiles, two key sectors that have deadlocked negotiations. The Japanese side is less upbeat, citing progress but no basic agreement.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow

 

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