Amazon’s core two-day shipping offering has been cut in half.
The e-commerce giant announced Thursday that it planned to offer free one-day shipping to all Prime members, bookmarking $800 million in upgrades to its warehouses and delivery services during the second quarter. Amazon also beat first-quarter earnings estimates by a wide margin.
Four experts weigh in on their main takeaways from the company’s better-than-expected quarter.
Stephanie Link, global equities research director and portfolio manager at Nuveen, said a solid quarter delivered just what analysts expected.
“North America came in at 17% growth, that’s better than 16%. You have international coming in at 16%, expectations were for 13% growth. And AWS in the low 40s I think was really what people were expecting. So it’s a solid number. It didn’t blow it away, though, other than the bottom line.”
Gerald Storch of Storch Advisors, who is also a former chairman and CEO of Toys R Us, said the company still struggles with its retail operations beyond e-commerce.
“Something that didn’t look good was that the physical stores were only up 1%. If they think the Whole Foods acquisition is working then they’re drinking something out of the spin gun. The whole thing when they lowered prices — no retailer lowers prices just to be a good guy. They’re trying to generate sales and they’re not succeeding in doing that at physical stores. Physical stores are tough and they’re learning that as they go forward.”
Liz Dunn, founder and CEO of Pro4ma, said the outlook looks weaker than expected.
“I think the guidance was a little disappointing for the second quarter. The second-quarter profitability is not quite as strong as this growth that we’ve seen in the first quarter. But the first quarter from a profitability standpoint was obviously fantastic … those fast-growing, high-margin businesses are very important.”
Tom Forte, senior vice president and consumer internet analyst at D.A. Davidson, breaks down where the growth is coming from.
“You have yet another quarter with north of 40% growth for AWS so I acknowledge that you’re starting to see slower growth in advertising as the base gets bigger but Amazon is still very early in advancing their advertising efforts.”