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July 25, 2019 2:30 PM, EDT

Amazon Results to Show Extent of Sales Boost From 1-Day Shipping

Amazon Bartek Sadowski/Bloomberg News

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The effects of Amazon.com’s one-day shipping push on profitability and sales will be watched closely when the e-commerce giant reports earnings July 25.

Amazon’s pledge to spend $800 million in the second quarter for faster delivery to its Prime members should help revenue growth rebound from a four-year low in the first quarter, but it also expected to hurt Amazon’s already slim operating margins.

Analysts, on average, project Amazon’s sales rose 18% to $62.46 billion in the quarter ended June 30, according to estimates compiled by Bloomberg. That’s compared with 17% growth in the prior quarter. Operating profit is estimated to be $3.71 billion, down from $4.42 billion in the first quarter.

“The program’s added convenience should drive top-line acceleration and improve stickiness for Prime members,” Canaccord Genuity analyst Michael Graham wrote in a research note.

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Faster delivery is critical for Amazon as it faces increasing competition from traditional retailers like Walmart Inc. and Target Corp. and newer entrants such as Shopify Inc. On July 24, eBay Inc. unveiled a new shipping service to deliver orders more quickly and cheaply. Amazon shares closed July 24 above $2,000 apiece, less than 3% from their September 2018 record, after a 33% rally in 2019.

Continued strength in Amazon’s higher margin businesses, such as cloud computing and advertising, is expected to cushion profits, according to Stifel.

“[Those businesses] should continue to be a tailwind for operating margin and allow the company to invest more heavily in its retail capabilities,” analyst Scott Devitt wrote in a research note.

Amazon’s third-quarter forecast should benefit from last week’s 48-hour Prime Day event, which surpassed sales from the previous Black Friday and Cyber Monday combined, according to the company. Amazon didn’t disclose more detailed information about the sale.