Amazon Says Supply Chain Investments Could Hurt Profit

Amazon Says Supply Chain Investments Could Hurt Profit

Amazon.com is telling investors its heavy investment in distribution centers and other supply chain improvements to speed delivery of consumer goods likely will cut into profit in the coming months.

The online retailing giant spent some $500 million in bulking up shipping capabilities in the fourth quarter. Capital spending was one reason the company’s net profit fell 57 percent despite a 35 percent year-over-year increase in revenue in the last three months of 2011.

But that investment will help push sales up at least 22 percent year-over-year to $12 billion in the fourth quarter, according to a Seeking Alpha transcript of the company’s earnings call. The opening of 17 distribution centers in 2011, bringing Amazon’s total footprint to 69 facilities, could help drive sales up to 36 percent year-over-over year to $13.4 billion in the first quarter.

“In terms of fulfillment and delivery time, we're continually trying to improve all of our processes around from a customer standpoint, and that includes fulfillment and delivery speed,” said Thomas Szkutak, senior vice president and chief financial officer. “And so you've seen over the last several years, we've gotten closer and closer to customers from a delivery speed standpoint.”

-- Contact Mark Szakonyi at mszakonyi@joc.com. Follow him on Twitter @Szakonyi_JOC