Global e-commerce major Amazon is expecting its December quarter (Q4) revenue to take a hit as the Diwali festive season in India extended over two quarters. Other factors expected to affect sales are acquisitions of Whole Foods and Souq, said Brian T Olsavsky, senior vice-president and chief financial officer of Amazon during an earnings call on Thursday.
“We are factoring that in this year, that’s just something we’re expecting,” he said. “Then, there are also two other issues — the Diwali holiday in India was all in Q4 last year and a bit of it was in Q3 this year. Also, the Japan consumption tax was raised from 8 per cent to 10 per cent on October 1,” said Olsavsky, during an earnings call for the company’s third-quarter ended September 30, 2019.
For the fourth quarter ending in December 31, Amazon said it was expecting its net sales to be between $80 billion and $86.5 billion, a growth of 11-20 per cent over the corresponding period in the previous year.
The company has taken into account an unfavorable impact of approximately 80 basis points from foreign exchange rates while giving this guidance. The operating income is expected to be between $1.2 billion and $2.9 billion, compared with $3.8 billion in Q4 of 2018.
“With this year's festival sale period straddling across two quarters unlike the previous year, this will have some impact on their (Amazon) quarterly financial reporting and guidance, given company’s big bets on the Indian market,” said Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India.
Amazon as well as its India rival Flipkart had claimed huge success during the six-day festive sale period at ended on October 4. Both the companies claimed to have made significant inroad to tier-II, III and other smaller cities in acquiring newer customers that pushed their sales across categories. According to consulting firm RedSeer, Indian etailers achieved $3 billion (around Rs 19,000 crore) in gross merchandised value during this period.
Given the performance during the first sale event, the whole festive month up to end of October, is expected to generate up to $6 billion (Rs 39,000 crore) in GMV, it added.
In the September quarter of 2019, Amazon.com said its net sales increased 24 per cent to $70 billion on year-on-year basis. The company however saw a 27.6 per cent decline in its net profit at $2.1 billion when compared with the year ago period.
“We are ramping up to make our 25th holiday season the best ever for Prime customers — with millions of products available for free one-day delivery,” said Jeff Bezos, Amazon founder and CEO.