The big e-commerce headline this week was the 16% profit gain at Amazon.com during the third quarter. Sales were up at Amazon but a number of analysts also fretted over increasing operating expenses. “Costly Growth for Amazon” read The Wall Street Journal headline and “Amazon Q3 Tops Street Ests, But Margins Fall, And Shares Drop,” said Barron’s Tech Trader Daily blog.
The company is opening 13 new distribution centers this year helping to fuel the 40% increase in operating expenses, reports The Journal. But there are other factors at play, too, such as its “Prime free-shipping loyalty program to more groups, including new parents and college students.” It also continues to invest in updates to its Kindle e-reader.
One analyst in The Journal story, though, was not dissuaded:
“Amazon has been trying to build their fulfillment system in advance of the holidays,” said Scott Tilghman, an analyst with Hudson Square Research.
That spending is worthwhile because “Amazon has a pretty sticky customer base,” he said. “You get somebody hooked and they love coming back, and you have nice long-term revenue stream.”
