Despite predictions of lackluster sales this season, Amazon.com remains upbeat
Saturday, November 24th 2001, 12:00 am
By: News On 6
SEATTLE (AP) _ Way back in the dot-com craze, Amazon.com lived by the motto ``get big fast.''
These days, it's more like ``save money fast.''
The renegade company that reveled in its unorthodox approach once spared no expense to get customers what they wanted, even if it meant searching a corner book store for a rare title that wasn't available on its trademark Web site.
``Those are neat stories from a day when we were at much lower volume,'' said Jeff Wilke, chief of operations for the Internet retailer.
Now, the 6-year-old company _ one of the last-standing dot-com standard-bearers _ is more likely to tell stories about operating efficiencies, streamlining operations and smart inventory moves.
Amazon is predicting lackluster sales in its all-important holiday season fourth quarter, and Wall Street is worried about the steep drop in revenue at its books, music and video store. That's Amazon's core business, and its only profitable sector.
Still, Amazon executives remain almost obsessively upbeat. Although they haven't said when they expect to make a real profit they say Amazon is still on track to turn its first-ever pro-forma operating profit this quarter.
``If the economic environment hadn't gotten so bad we actually would have been well ahead of where we thought we would be,'' said David Risher, who heads the company's Worldwide Applications Group.
Pro forma operating profitability excludes costs such as stock options, losses from investments and restructuring charges, and it's a far cry from true profitability. For example, Amazon had a net loss of $170 million in the third quarter of this year, while its pro forma operating loss was just $27 million.
But analysts say reaching that goal could make or break Amazon.com.
``That's what investors are looking for,'' says Jeetil Patel, an analyst with Deutsche Banc Alex. Brown. Patel is convinced Amazon will meet its goal, and praises the company for its cost-saving measures.
But other industry watchers are less optimistic _ and the company's roller-coaster stock performance shows Wall Street is growing impatient.
Shares in Amazon dropped more than 20 percent last month after the company said revenue would be flat or grow by at most 10 percent in the fourth quarter, the most important sales period for retailers.
Shares, which plunged by about 70 percent in the past year, have since rebounded somewhat.
More worrying to analysts, in the third quarter the company saw a 12.1 percent drop in books, music and video sales compared to last year.
Based on revenue comparisons, Prudential analyst Mark Rowen believes Amazon lost significant market share to rival Barnes & Noble.com in that quarter. That's a worrying trend, if Amazon can't abate it.
Amazon's Risher says the company is confident it will rebound from the drop thanks in part to increased sales in the company's used-books section. The company has taken steps, such as price cuts and improved features, to bring business back, he says.
Operating costs are down 20 percent, Amazon Chief Executive Jeff Bezos boasted last month.
Much of that cost-saving has come as Amazon has become better at predicting what inventory it needs to buy and store, and started farming out the costly warehousing task whenever possible.
Now, the company is taking that to the next level. In the past nine months, Amazon has struck deals to provide the Web retail capabilities for established companies like Target, Borders and Toys 'R' Us.
Such deals take advantage of Amazon's clear strength _ its Internet sales and payment technology, and its strong customer base.
``We want to be the place where you come and buy anything online,'' Risher says. ``The thing that's changed over the past couple years is that we've realized we'd be much better off if we start to do that in partnership with others rather than by ourselves.''
Both Wilke and Risher predict, though, that it will be awhile before these deals turn into significant revenue for Amazon.