Amazon not in its Prime as Q2 net loss soars

Market watchers point to the cost of fulfilling its 'Amazon Prime' free shipping promise as the root of its ills

Despite posting a 23 per cent increase in net sales for its second quarter financial results, e-tail behemoth Amazon suffered net loss of $126m, compared with $7m the previous year.

Turnover for Q2 hit £19.3bn, compared with $15.7bn in the same quarter last year, but the scale of the firm’s loss caused share prices to tumble.

According to an article on USA Today, the blame is being squarely laid at the door of the firm’s ‘Prime’ service, which promises customers two-day free shipments.

Forrester analyst Sucharita Mulpuru told USA Today: “Google, Apple and Facebook invest all the time in innovation and don’t have losses like this. The big difference is Amazon is spending all this money on shipping those orders.”

However Jeff Bezos, founder and chief executive of Amazon, skimmed over the loss and focused on the positives.

“We continue working hard on making the Amazon customer experience better and better” he said. “We’ve recently introduced Sunday delivery coverage to 25 per cent of the US population, launched European cross-border two-day delivery for Prime, launched Prime Music with over one million songs, created three original kids TV series, added world-class parental controls to Fire TV with FreeTime, and launched Kindle Unlimited, an eBook subscription service.

He added: “For our AWS customers we launched Amazon Zocalo, T2 instances, an SSD-backed EBS volume, Amazon Cognito, Amazon Mobile Analytics, and the AWS Mobile SDK, and we substantially reduced prices. And today customers all over the U.S. will begin receiving their new Fire phones — including Firefly, Dynamic Perspective, and one full year of Prime — we can’t wait to get them in customers’ hands.”

Looking ahead the outlook is even grimmer for Amazon, with the firm revealing it expects to post a Q3 operating loss of between $810m and $410m, compared with a $25m in Q3 2013.

This includes approximately $410m for stock-based compensation and amortisation of intangible assets.