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Amazon Misses Wall Street Profit Estimates Sending the Stock Tumbling

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Amazon Stock News

On Thursday, Amazon (NASDAQ:AMZN) reported its third quarter earnings. Although the company has slightly exceeded Wall Street estimates on revenue, it has missed the estimates on profit, causing its stock to drop as much as 8.6% after the earnings were announced. “Oh, how the mighty have fallen” is the appropriate quote to in this scenario as this the first time in two years that the e-commerce giant’s earnings have indeed fallen.

Earnings report

Third quarter sales went up 26% amounting to $70 billion and this is great considering that the same quarter of 2018 had $56.6 billion. However, although Amazon Web Services again powered the company’s bottom line as it is responsible for 13% of its total revenue, its growth has slowed down again and missed analyst expectations as it was below 40%, dropping further from 37% in the previous quarter. Last year’s third quarter had a 46% bump whereas this one was only 35%, which is the lowest growth rate in more than five years.
Cloud investments eating up profits

However, this segment is still growing faster than the parent company as a whole as its operating income made about 71% of the company’s overall operating profit. So the question is why have profits have fallen so sharply? Well, mostly due to the fact that shipping costs have risen and that the company is investing heavily in new cloud products and data centers around the world, all of which are eating up its profits. Its rival, Microsoft, also just reported its earnings and showed that Azure’s revenue rose at an impressive year-on-year rate of 59% during its last quarter. It remains to be seen whether AWS or Microsoft will end up getting the $10 billion contract to build the Pentagon’s cloud infrastructure.

More on those shipping costs

The company’s shipping costs increased 46% year-over-year in this record to a record figure of $9.6 billion. This is more than a half-billion dollars comparing to the amount they spent in a year ago, and during a busier season. This is part of the company’ strategy to beat competition as it is now offering its Prime members free next-day delivery even for products priced below $5. Interestingly, in 2018 is when the company cut on hiring due to absorbing the acquired Whole Foods’ workforce and now, they added 100,000 employees just during this quarter, which according to many analysts was the most surprising figure in the release.

Competitors

As for the cloud infrastructure, besides Microsoft, there’s Google (NASDAQ:GOOGL), Alibaba (NYSE:BABA) that fortunately has net cash considering its heavy debt load, IBM (NYSE:IBM) that is promoting AI-based business intelligence platforms and Oracle (NYSE:ORCL) who was just named a leader in leader in translytical data platforms by Forrester Research due to the platforms’ perks and ease of use.
Target (NYSE:TGT) is literally firing on all cylinders right now as Amazon already forced them to ‘reinvent and redesign’ its sales process and stores, but Amazon’s lower cost shipment will be hard, if not impossible to beat.
On the other hand, CVS (NYSE:CVS) is focused on the health segment as recently the company hired a former Fitbit executive to create consumer-focused health products. It is also creating HealthHUBs where customers can access digital health tools and shop a wider inventory of products. All of this as a counter-hit to Amazon who bought the online pharmacy PillPack last year and announced it will join forces with JPMorgan Chase and Berkshire Hathaway to provide healthcare insurance and telemedicine services to employees. No doubts that Amazon is creating a lot of trouble to its competitors.

Outlook

Amazon is investing heavily in cloud products. And this is a company that has historically not been afraid to sacrifice profits for growth and the good news is that it is still leading the cloud market. But its moves also grab attention of regulators, lawmakers and climate change activists. It was less than a month ago that the company was forced by its employees to pledge to zero emissions. The company was ambitious even in that segment by setting its goal 10 years ahead of the Paris Climate accord that was decided upon in 2015. The company plans to achieve this by purchasing 100,000 electric delivery trucks that are expected to be on the road by 2022. It will also continue investing to preserve nature and base 80% of its operations on renewable energy by 2024. But, the new move that includes shipping a shampoo or a tooth brush for free will surely be liked by consumers but will also likely undermine confidence in the company’s green initiatives. Especially if this strategy results boosts up demand, can emissions really be lowered?

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

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BenzingaEditorial

Bed Bath & Beyond’s Stock Plunges With Hard Times on the Horizon

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On Wednesday, January 8, third quarter earnings and revenue miss caused the share price of Bed Bath & Beyond Inc (NASDAQ:BBBY) to plunge 8 percent with the retailer withdrawing fiscal 2019 outlook. On Thursday, stock was down 11 percent in premarket trading.

Third quarter earnings

Oh, how the mighty have fallen seems as the appropriate phrase to describe net earnings from of $24.4 million from one year ago dropping to a net loss of $38.6 million. Refinitiv expected earnings of 2 cents whereas the retailer delivered an adjusted loss per share of 38 cents. Revenue dropped 9 percent and amounted to $2.76 billion with same store sales dropping 8.3 percent versus the 5 percent expected. Both sales and profitability are expected to remain under heavy pressure in the fourth quarter as well. The retailer found that its results were significantly impacted by the fact Thanksgiving fell later than usual, resulting in one week less of holiday sales.

Tritton’s shakeup

On Monday, the retailer announced that it accomplished a real estate deal that netted the company $250 million in proceeds, what according to Tritton is the first step towards unlocking valuable capital. And only in December, Tritton decided to let six senior executives go and is currently in the recruitment process for their roles. Bed Bath and Beyond’s turnaround strategy is well underway with these swift changes but surely, there are many more to come as some of these executives have been with the company for more than 20 years – so “out with the old, in with the new” it is.

Intense competition

Amazon (NASDAQ:AMZN) has vigorously shaken up the retail landscape, but Target Corporation (NYSE:TGT) and Walmart Inc (NYSE:WMT) are by no means, left behind, but are in fact doing beyond great as they are successfully luring customers with more attractive websites and speedier shipping. And all of them are selling pretty much all the products that Bed Bath & Beyond has in store, leaving the struggling company in quite a turmoil.
But Amazon is by no means still the emperor sitting on the e-commerce throne as it is literally bleeding out to retain its crown. The world’s biggest online stores is losing money on its sales in order to achieve its shipping policy and in the world of ‘free-shipping’, it seems it could soon be beaten by Walmart, world’s third largest store but America’s largest retailer. And it is growing fast into online retail with its online sales exploding 78 percent up since 2016, but more importantly, now growing twice as fast as Amazon. And here’s the trick, Walmart is using its physical stores as warehouses for online sales. And since these stores are already turning a profit, maintaining extra warehouse space is nothing but a small addition to costs and that makes its strategy far different. Amazon only has 110 warehouses across the US so Walmart will soon have the biggest and more effective shipping network. Although both have great growth potential, Walmart is going full speed ahead in the online retail wars. Not good news for Amazon and especially for poor old Bed Bath & Beyond.

Outlook

CEO Mark Tritton, a Target veteran who started commanding the ship in October has announced that strategic plans for creating a long-term profitable growth will be revealed within the next two months, showing his discontent with these unsatisfactory results which are more than an imperative for change of the current business model. Bed Bath & Beyond desperately needs a new vision and hopefully, Tritton will be able to deliver it, otherwise things could get even worse.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

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Walgreens Isn’t Getting Closer to Turning Sickness to Health

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Walgreens News

Walgreens Boots Alliance (NASDAQ:WBA) reported its first fiscal quarter earnings on Wednesday, January 8 before the market opened. Its profits were harmed by increased competition from online and discount retailers, resulting in less prescriptions. Despite the slow start of 2020, the company hopes to be one of the rare survivals of the intense shakeout that is upon the pharmacy sector and is expected to wipe out thousands in the years to come.

Earnings report

Wall Street expected $34.6 billion in revenue and earnings per share of $1.41. And results fell short of expectations with revenue of $34.34 billion. Net profits declined sharply, 25 percent to be exact to $845 million for the period ended November 30th, 2019. Despite rumours that that the global pharmacy chain could be taken private in a massive leveraged buyout but Chief Executive, Stefano Pessina, didn’t address this speculation but rather emphasized that the company is making a progress in reinventing new services and digitizing its drugstore chain. The company is investing hundreds of millions of dollars in this reinvention while under a massive cost management program. And at least sales went up 1.6 percent. But the weak pharmacy spots cost its shares a consequent fall of 7 percent after the earnings report and even dragged those of rival CVS Health Corporation (NYSE:CVS) down 2 percent as investors are concerned that the pressures on reimbursement rates from insurers is likely to make further damage to profits.

Miserable 2019

The pharmacy and retail company ‘won’ the award of worst performer for 2019 when it comes to Dow Jones Industrial Average. S&P gained 27% over the last 12 months whereas Walgreens fell 16 percent. During this everything but memorable fiscal year, Walgreens sales grew just 4% and earnings per shares were down from fiscal 2018.

Along with its rival CVS Health Corp., Walgreens is managing to help itself somewhat by benefiting from many closed up pharmacies and acquiring their customers and consequently, their prescriptions. But, Walgreens itself has closed some of its stores as the company announced in August it will close an additional 200 stores to the already announced shutdown of 750 stores. But Walgreens’ strategy is different to of its rival that aims to attract customers with lower cost personal care items and primary care services. Yet, Pessina is more than confident in Walgreens’ strategic partnership approach, which most recently included expanding its relationship with The Kroger Co (NYSE:KR) in order to include a new group purchasing organisation and simply, cushion the impact from all those blows.

Outlook

The two strong headwinds that have hampered the company—the falling reimbursement rates insurance companies pay for prescription drugs and the struggles of its retail business aren’t going to change direction anytime soon. Giants known as insurers are pressuring pharmacies on margins and Amazon.com Inc (NASDAQ:AMZN) along with many other digital competitors are already doing a great job in luring customers. Surely, Walgreens cannot be saved by LED lighting that will save money, which was mentioned by one of its executives during the conference call, but long-term, maybe a very long and severe flu season can help Walgreens in turning its own sickness into health. Yet, Wall Street remains sceptical. Since news broke in November about a possible LBO, the pharmacy chain has now lost all the gains it made since then. One thing is for sure, whoever you are, if you are anywhere near being a pharmacy, it is a very difficult place to be at.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

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Xerox Continues Pursuit of HP by Showing the Money, $24 billion That Is

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Xerox News

On Monday, Xerox Holdings Corp (NYSE:XRX) revealed a financing commitment with the aim to ease concerns that it is unable to fund its HP Inc (NYSE:HPQ) buyout proposal. In order to remove any doubt and prove it is capable to take over its much larger rival, Xerox secured binding financing commitments worth $24 billion from Citigroup Inc (NYSE:C), Mizuho Financial Group Inc (NYSE:MFG) and Bank of America (NYSE:BAC).

The Takeover Saga

Xerox has a market cap of $8 billion whereas HP’s kingdom is valued at $30 billion but this isn’t the common ‘big fish eat little fish’ scenario. The $33.5 billion takeover bid was daringly offered by Xerox in early November. This cash-and-stock offer was rejected twice HP who felt that $22 per share is not in the best interest of its shareholders and furthermore, that it significantly undervalues their company. When the executives rejected the proposal yet again in late November, they criticized Xerox’s aggressive approach and questioned its 10 percent decline in revenue since last year, further showing concerns about Xerox’s financial abilities to pursue this merger. But Xerox has now shown publicly its capability to pursue this value enhancing opportunity. And although profitable for now, when it comes to printing, earnings are dropping year after year as both companies are struggling and spinning off different ventures in order to leave this aging business behind. According to Xerox, this deal would save both companies $2 billion in costs over the next two years and would boost revenue for $1.5 billion over the next three years.

Outlook

Xerox strongly believes that this union would result in valuable synergy to both parties: increasing the addressable market as well as shareholder returns, ease debt and drive innovation that both companies desperately need to survive in the new era as the printing business continues to age. Moreover, Xerox also finds that it is strong in areas where HP has key market gaps, such as managed services. It obviously presented its value-creating case successfully to the big banks, winning their vote of confidence. But what will it take to win over HP? Now that the major concern is resolved, some shareholders might rethink Xerox’s proposal. But here’s an even bigger question. If successful, what does Xerox intend to do with HP’s PC business which accounts for the majority of HP’s revenues, and moreover, why does it want to get further into not only one but two markets that are slowing down? Or maybe Xerox knows something about printing and PCs that we don’t and this very same reason could also be behind HP’s self-confidence. But Xerox has now shown the money and the ability to get its agenda though so this saga is far from over.

This article is contributed by IAMNewswire.com. It was written by an independently verified journalist and is not a press release. It should not be construed as investment advice.

Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com

Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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