(Welcome to Loose Cannon, a staff-written editorial focusing on issues of interest to the direct marketing community. To respond to this week's editorial via e-mail, please send your message to rlevey@primediabusiness.com.)
According to my homegrown number-crunching techniques, when Amazon.com releases its financials, it may take a loss in the neighborhood of $912 million loss for 2001. If Amazon keeps it that low, it should break out the champagne and get all of its employees sozzled.
A $912 million net loss will mean this prototypical dot-com is getting healthier, if one can use that term about a firm that has yet to show a profit after six-and-a-half years. Nonetheless, below are my predictions for Amazon’s fourth-quarter and full-year results. Those of you that want to write sneering notes once the company releases its figures are welcome – but those that want to write sneering notes BEFORE Amazon releases its figures are venerated.
Amazon’s full-year 2001 sales should top out at $3 billion. Despite a recession, the company had been running about $220 million ahead of last year’s sales before the fourth quarter started. And people have been scared to shop in malls lately.
Amazon has cut its cost of sales through 2001. Three years ago, when it was calling itself the world’s largest bookstore, it must have had sweetheart deals in place. By now these have grown to super-sweetheart deals. Its full-year cost of sales will be roughly $2.24 billion. That said, if it doesn’t stop losing money on electronics, tools and kitchen equipment, the engagement’s going to be called off.
I haven’t heard Amazon’s wanting-to-buy-the-Pentagon-for-storage-space commercial recently. But don’t blame 9/11: It had been cutting back its marketing spending throughout the year. Unless they went on a buying spree in the fourth quarter Amazon’s losses from operations (which includes marketing) will shrink to $646.8 million for the year.
"Aha!" I hear Wall Street cry. "Aren’t companies -- even 'new economy' companies -- slaves to their bottom lines?" (Yeah, and it’s about time you all woke up to that.) My bottom-line prediction is that Amazon’s fourth-quarter net loss will be roughly $340 million, and $912 million for 2001, half a billion dollars better than in 2000. There are still hurdles – how much debt does this company have? -- but it will be on the right track.
For those keeping score, my picks are:
For the fourth quarter:
Revenue of $1 billion
Cost of sales $755 million
Gross profit of $245 million
Loss from operations of $220 million
Net loss of $340 million
And for all of 2001:
Revenue of $3 billion
Cost of sales of $2.24 billion
Gross profit of $760 million
Loss from operations of $647 million
Net loss of $912 million
That’s my two cents applied to Amazon’s $3 billion. I’ll report back to you next Monday – and I imagine I’ll be hearing from some of you before then.
