Amazon's figures just don't add up to a fourth quarter profit excluding one-time items. Gross margin at Amazon's consumer electronics store was about 8 percent at best, according to Prudential estimates. Subtract fulfillment cost and free shipping promotions and Prudential estimates Amazon's margin was negative 10 percent, and on a fully allocated cost basis, negative 42 percent in the quarter. The average lifetime of an Amazon customer is little more than two years. For catalog retailers, the average lifetime of a customer is 51 months.
Cost cutting can also disrupt the business.
Wall Street wants growth. Amazon can't juice sales and be profitable. Wall Street wants both. Once the novelty of an operating profit wears off, Amazon will be measured by sales growth again. Amazon can't have long-term profitability without sales growth.