Will Amazon Lovers Stick With a Prime Price Hike?
Only months after Amazon (NASDAQ:AMZN) hiked the purchase amount eligible for free shipping from $25 to $35, the company is now considering increasing the fee of an Amazon Prime membership by between $20 and $40 due to the higher cost of shipping. The plans are not final, but CFO Tom Szkutak discussed the possible rate hike during the company’s fourth-quarter earnings call on Thursday.
“Even as fuel and transportation costs have increased, the $79 price has remained the same. We know the customers love Prime as the usage of the shipping benefit has increased dramatically since launch. On a per customer basis, Prime members are ordering more items across more categories with free two-day shipping than ever before,” Szkutak said.
“With the increased cost of fuel, transportation, as well as the increased usage among Prime members, we’re considering increasing the price of Prime between $20 to $40 in the U.S.,” he continued.
Amazon shares plummeted in after-hours trading on Thursday after the company reported fourth-quarter financial results that disappointed investors. Amazon continuously reported earnings losses during 2013, but revenue remained sky-high. Investors seemed to stay on board with that tactic last year, but now it seems as if they wish the company would pad out its margins at least slightly.
Earnings improved versus the fourth-quarter of 2012, but still missed analyst estimates by a significant margin. Fourth-quarter net income rose to $239 million, or 51 cents per share, from the $97 million, or 21 cents per share, in net income the company reported the previous year. Yet the improvement was not enough to beat Wall Street’s average estimate of 66 cents per share, and that miss prompted investors to push shares down.