Amazon.com Profit Rises 24% as Online Sales Hold Up (Update3)
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By Joseph Galante
April 23 (Bloomberg) -- Amazon.com Inc., the world’s biggest Internet retailer, reported first-quarter sales and profit that beat analysts’ estimates, bolstered by free shipping offers and demand for the Kindle electronic-book reader.
Profit jumped 24 percent to $177 million, or 41 cents a share, the Seattle-based company said today. Analysts predicted 31 cents, according to a Bloomberg survey. Sales rose 18 percent to $4.89 billion, also topping the $4.75 billion estimate.
Amazon.com has extended its lead over competitors by lowering prices and promoting free shipping. The shares have almost doubled since the start of December as consumers flocked to its expanded line of digital music, games and books. The company’s electronics and general merchandise sales in North America rose 42 percent to $1.17 billion last quarter.
“It’s amazing that a retailer can show 18 percent growth in a meaningful economic downturn,” Fred Moran, an analyst at New York-based Benchmark Co., said in an interview. “For them to do that without a significant impairment to margins and come through with a dime of earnings upside surprise is extremely impressive.”
Amazon.com rose $1.89, or 2.3 percent, to $82.50 in extended trading after closing at $80.61 today on the Nasdaq Stock Market. The shares have soared 57 percent this year.
Sales in the second quarter will be $4.3 billion to $4.75 billion, Amazon.com said, compared with the $4.61 billion predicted by analysts. Operating income will be $110 million to $190 million, the company said.
Improving Efficiency
Sales may increase 15 percent this year to more than $22 billion, according to analysts’ estimates. That would outpace the 11 percent growth in the e-commerce market as a whole, according to Forrester Research Inc.
Last year, the company reported profit of $143 million, or 34 cents a share.
Amazon.com plans to improve the efficiency of its operations to save money, Chief Executive Officer Jeff Bezos said on an conference call.
“We’ve gotten better every year, but there is still a lot of improvement that can be made,” Bezos said. “Everywhere we look, we find that we’re doing every operation in suboptimal ways.”
Amazon.com sells products in more than three dozen categories, ranging from power tools to musical instruments. The company also offers so-called cloud-computing services for companies that want to run applications and store data on outside servers.
Margins Expand
Sales in North America rose 21 percent to $2.58 billion, while international revenue advanced 15 percent to $2.31 billion, Amazon.com said.
Amazon.com competes with EBay Inc. for third-party merchants that want to sell items over the Web. EBay reported sales and profit yesterday that beat estimates.
Amazon.com improved profitability by encouraging third- party sellers to ship items in bulk to its warehouses and by doing a better job managing inventory, Chief Financial Officer Tom Szkutak said on the conference call.
Gross margin, or gross profit as a percentage of sales, expanded to 23.5 percent from 23.1 percent a year earlier.
Kindle Demand
Demand for the Kindle book reader has exceeded the company’s “most optimistic” expectations, Bezos said in the statement. The company introduced a new version in February that is thinner and can read books aloud.
Amazon.com’s success with the Kindle gives it the flexibility to offer customers other perks such as free shipping, said Mike Kwatinetz, general partner at Azure Capital Partners, a venture capital firm in San Francisco.
Free shipping has been critical to Amazon.com’s ability to boost sales, Sebastian Gunningham, vice president of merchant services, said in an interview last month.
“You have to work in the economics of free shipping to really be in e-commerce,” Gunningham said. “It makes a material difference to your success online.” |
