Amazon’s Push to Cut Delivery Time in Half is Costing the Company About $1.5 Billion

FILE – This July 17, 2019, file photo shows an Amazon shipping truck at a fulfillment center in Phoenix. Inc. reports financial earns on Thursday, Oct. 24. (AP Photo/Ross D. Franklin, File)

Amazon’s push for faster delivery is hurting its profits.

The online retailer said third-quarter profit fell 26% from a year ago, missing Wall Street expectations. Its stock sunk 7% in after-hours trading.

Amazon is moving to cut its delivery time in half, to one day instead of two, for Prime members who pay $119 a year. To do that, it’s adding more worker shifts in its warehouses and expanding its delivery network. The changes are costing the company about $1.5 billion, nearly double what it said it would cost. But Amazon said the one-day shipping is attracting more shoppers and gets them to spend more.

“It’s a big investment, and it’s the right long-term decision for customers,” said Amazon CEO Jeff Bezos, in a statement.

Earnings per share came to $4.23. That’s 36 cents below what analysts expected, according to FactSet.

Its revenue, however, beat expectations, rising 24% to $70 billion.

For the current quarter, which includes the busy holiday shopping season, Amazon expects revenue between $80 billion and $86.5 billion. That’s below the $87.4 billion analysts expected.

Source:Associated Press – Joseph Pisani