Amazon.com, Inc.'s profit has taken a big hit in the third quarter of 2016 as the company's cost surged due to heavy investments to meet consumer demands for orders to be delivered faster. Shares of the online retail giant have fallen as well.
The Wall Street Journal reports that Amazon had opened 23 new warehouses worldwide to fill orders since July. The company has also shortened the delivery time of their shipments and predicts that their heavy investments will continue for the rest of the year.
Chief Financial Officer Brian Olsavsky said that adding the warehouses "was a big undertaking." The investments, though, has put Amazon in a good position to handle the flood of holiday orders.
According to Time, Amazon's shares were down 6.8% in after-hours trading following the report. The company's earnings per share were short of Thomson Reuters I/B/E/S average estimate of 78 cents.
Amazon said its net income rose to $252 million, or 52 cents per share. It's an increase from last years $79 million, or 17 cents per share income.
Robert W. Baird & Co. analyst Colin Sebastian said that the results of Amazon's third-quarter earnings report show that the company is still in investment mode. He said the street should not expect linear growth in profitability.
For the fourth quarter, Amazon is forecasting net sales of between $42 billion and $45.5 billion. The forecast already includes the holiday shopping season.
Thomson Reuters I/B/E/S said analysts, on average, expect a net sale of $44.58 billion for the fourth quarter. The company is planning to hire 120,000 seasonal workers in the U.S. for the holiday season.
The planned seasonal hires are 20 percent more than last years, showing the threat the giant retail poses to traditional retailers. Amazon's shares, including the up to Thursday's close of $818.36, had risen 21.1 percent this year.
