Amazon's Holiday Outlook Difficult to Fathom

SAN FRANCISCO - Amazon's ( AMZN) wider-than-usual revenue guidance for the fourth quarter has some analysts wondering how bad the holiday season will actually be.

The online retailer beat Wall Street's third-quarter earnings estimates by 2 cents, but raised concerns when it offered fourth-quarter revenue guidance in the range of $6 billion and $7 billion, which translates into a growth of between 6% and 23% and factors in more than 500 basis points of negative impact from foreign exchange.

"It is a wider range than we have given before, both in dollar terms and percentage terms," said Chief Financial Officer Tom Szkutak on Wednesday's conference call with analysts. "We think that is prudent in this environment and again, we are going to focus on what we do best, which is satisfying customers and we think we are well-positioned to do that, so that's what we plan on doing."

Amazon's shares slipped as much as 14% in after-hours trading on Wednesday. The stock was down 6% to $46.99 in recent trading.

Jeffrey Lindsay, an analyst for Sanford Bernstein, criticized Amazon's broad guidance in his research.

"We think this is unrealistically pessimistic even in today's environment," he wrote in his research. "Given that management must already have some idea of October's performance, we think the updated range of revenues for the fourth quarter, namely $6 billion to $7 billion, is too wide to be of much help to investors."

Barclays analyst Doug Anmuth noted in his research that a year ago, Amazon had provided a revenue guidance range of $450 million for the fourth quarter, far narrower than the $1 billion range the company is offering now.

Anmuth said Amazon has limited visibility into the crucial holiday season and even less insight on the impact of foreign currency.

"While Amazon has held up well in recent quarters through the early part of the slowdown, we think the company is more likely to be impacted going forward as high demographic customers pull back more on spending and competing retailers discount more aggressively," he wrote.

Amazon's third-quarter results mimicked some of the same trends that its rival eBay ( EBAY) is also seeing. The online auction giant got slammed last week when it offered a weaker-than-expected revenue outlook, plagued by a strengthening U.S. dollar that is hurting its business overseas, as well as softening consumer spending in a down economy.

Lindsay, however, pointed out that Amazon's number of active users in the third quarter grew 17% vs. a year ago, compared to only a 3% increase for eBay.

Brick-and-mortar retailers are also expected to suffer over the holidays -- in fact even more so than online retailers. National Retail Federation estimates only a 2.2% increase in sales for November and December combined- the two busiest shopping months of the year. That would be a significant drop from the 3% increase retailers saw a year ago.

Mark Mahaney, an analyst for Citigroup, wrote in his research that while Amazon provided an unusually wide guidance range for the fourth quarter, "we certainly believe the mid-point is doable whereas both the high end and low end of the guidance range seem remarkably unbelievable."

He pointed out that in order for Amazon to hit the low end of its range of 6% growth, organic revenue growth in the U.S. and internationally would have to slow to a 10% increase compared to a year ago, "which we estimate implies a retail environment that is unlike any we have seen for at least the past 30 to 50 years."

The high end of Amazon's guidance implies an organic growth rate of roughly 28% year-over-year, "which seems even more unlikely given weakening trends in September and into October."

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