Amazon Keeps Spending More As Its Customers Spend Less
by Timothy Phillips
Another Amazon (AMZN) quarter passes where the numbers continue to get worse as revenue growth slows, operating expenses soar and huge capital expenditures continue to shrink free cash flow. Although the erosion in almost all financial metrics in the first quarter followed the downward historical trends, this quarter was different in that analysts finally expected the numbers to improve in 2013 as the large infrastructure investments Amazon has made were supposed to drive operating efficiencies by this point. While my modeling of the business has been able to accurately predict that shipping and operating expenses would outpace Amazon's revenue growth and therefore these efficiencies would not occur, I have been surprised at the pace in which customer's spending on Amazon has been saturated to a point where it is now actually declining. At 209 million active customers, this last point is an extremely troubling trend for Amazon as it needs each existing customer to spend more each year as its new customer additions inevitably will slow. read more »
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