Amazon sparks fears with sales forecast

Amazon has forecast lower-than-expected sales for the first three months of the year sparking investor fears over slowing growth.

Shares in the online giant fell almost 5% in after-hours trading despite it reporting record sales and profit for the Christmas holiday period.

Amazon expects sales to grow between 10% and 18% in the first quarter, slightly below analyst forecasts.

A hit from currency exchange rates was partly to blame, the firm said.

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In the three months to the end of the year, which included the crucial Christmas period, profit rose 63% to $3bn (£2.2bn) while revenue was up 20% to $72.4bn.

While this was better than analysts had expected, it was still the slowest sales growth for the firm since the start of 2015.

The firm’s widening profits are largely driven by the growth of its high-margin businesses, including its cloud, advertising and third-party seller services.

Amazon’s cloud computing arm, Amazon Web Services, which provided two thirds of the firm’s profit last quarter, is one of the services the firm is relying on to help offset slowing revenue growth in its retail arm.

“On the profit front, Amazon’s results are impressive,” said Neil Saunders, analyst at research firm GlobalData.

However Mr Saunders said sales growth appeared to have slowed as Amazon matured, raising questions about its future.

He said rivals such as Target and Walmart had invested heavily in their online operations and were fighting back.

“Our data show that they made solid customer gains, and some of that dinted Amazon’s growth. In our view, the gap between Amazon and the rest is now narrowing.

“Amazon will now need to work doubly hard to achieve any future sales gains,” he added.

‘Relentless assault’

Amazon founder and chief executive Jeff Bezos, who is also the world’s richest man, singled out its smart speaker Alexa, saying it was the company’s best-selling device.

“Echo Dot was the best-selling item across all products on Amazon globally, and customers purchased millions more devices from the Echo family compared to last year,” he said.

Nicholas Hyett, analyst at Hargreaves Lansdown, said the figures showed Amazon’s “relentless assault on the High Street over Christmas”.

He said the online retailer was “tightening its grip” on its customers with add-on services such as Amazon Prime which offer free delivery and other benefits.

“With so many opportunities, the biggest problem facing Amazon CEO Jeff Bezos is where to focus the attention,” he added.