Amazon shares rise after operating loss lower than expected

Amazon.com Inc. rose the most in three months after posting a smaller operating loss than analysts had predicted, suggesting that the world’s largest online retailer is doing a better job managing rising costs.

The third-quarter operating loss was $28 million, Amazon said in a statement yesterday, less than the average analysts’ estimate for a $42.1 million loss. Sales rose 27 percent to $13.8 billion, less than the average analyst projection of $13.9 billion compiled by Bloomberg.

Chief Executive Officer Jeff Bezos is opening 19 fulfillment centers worldwide to offer speedier delivery to customers during the year-end holiday shopping season, contributing to a 28 percent increase in operating expenses. The Seattle-based retailer is getting better at managing margins, and investors are betting that higher spending now will result in higher sales down the road, said Colin Sebastian, an analyst at Robert W. Baird & Co.

“They’ve exceeded their operating profit expectations now for the fourth consecutive quarter,” he said. “Investors buy Amazon for long term expected cash flow growth and revenue growth -- the short term for Amazon isn’t as important as long as they are continuing down the trajectory of strong growth on the top line.”

Amazon rose as much as 5 percent, the most since July 27. The shares were up 3.8 percent to $231.44 at 1:05 p.m. in New York. Through yesterday, the stock had gained 29 percent this year.

LivingSocial Loss

Amazon’s third-quarter loss was $274 million, or 60 cents a share, compared with net income of $63 million, or 14 cents, a year ago.

The loss includes a charge of $169 million, or 37 cents a share, related to its stake in daily-deal website LivingSocial, which lost value as consumers and retailers soured on Internet coupons. Amazon invested $175 million in the coupon service in 2010, which means it has since lost 95 percent of its value, data compiled by Bloomberg show.

“Daily deals has been struggling,” said Daniel Kurnos, an analyst at Benchmark Co. in Boca Raton, Florida. “LivingSocial is going to need to re-accelerate their marketing expenses to keep the status quo.”

Excluding the impact of LivingSocial, Amazon had a loss of 23 cents, exceeding the 8-cent loss predicted by analysts, according to data compiled by Bloomberg.

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