Can Amazon Afford to Sell Cuisinarts for 58% Off?

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Amazon.com Inc. (NASDAQ: AMZN) said it would probably lose money in the current quarter, but that revenue would soar. How far is it willing to go to get a flood of customers during the holidays? A Cuisinart CPB-300 SmartPower 15-Piece Compact Portable Blending/Chopping System in Black is a clue. Amazon is selling it for 58% off its list price, cutting it down to $53.99 and promoting it aggressively to customers.

What does Amazon pay for the Cuisinart CPB-300 SmartPower 15-Piece Compact Portable Blending/Chopping System in Black? Very possibly more than $54. There is probably just one reason the e-commerce company is doing so. Discounting is one of the oldest tactics in retail. Lose money on some items and hope shoppers will buy products with high margins as they “walk” through the store. In Amazon’s case, the store location has millions of items.

The Cuisinart CPB-300 SmartPower 15-Piece Compact Portable Blending/Chopping System in Black represents what Wall Street believes is wrong with Amazon, and why investors have driven its share price down.

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When Amazon released is third-quarter report, management said:

Net sales increased 20% to $20.58 billion in the third quarter, compared with $17.09 billion in third quarter 2013. The favorable impact from year-over-year changes in foreign exchange rates throughout the quarter on net sales was $13 million.

However, it lost $437 million, which enraged some investors. It also gave a relatively detailed forecast:

  • Net sales are expected to be between $27.3 billion and $30.3 billion, or to grow between 7% and 18% compared with fourth quarter 2013.
  • Operating income (loss) is expected to be between $(570) million and $430 million, compared to $510 million in fourth quarter 2013.

Amazon’s 52-week high stock price is about $408. Shares trade for less than $313 now.

Founder Jeff Bezos has tried to buy market share in the past, as well as to get into businesses that investors believe are in overcrowded sectors. These include premium content video streaming and smartphones. The jury is still out on both of these.

However, what really triggers anxiety is how long Bezos intents to “buy” sales for Amazon’s core business, one in which it has operated for decades. Hasn’t it already proved that it dominates the online operations of large retailers like Wal-Mart Stores Inc. (NYSE: WMT) and Best Buy Co. Inc. (NYSE: BBY)?

Thus, many investors worry, is the thinking behind the 58% Cuisinart CPB-300 SmartPower 15-Piece Compact Portable Blending/Chopping System in Black.

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