Technology

Amazon's Sales Satisfy the Street


Amazon's Peter Larsen introducing Amazon Fire TV in New York earlier in April

Photograph by Jin Lee/Bloomberg

Amazon's Peter Larsen introducing Amazon Fire TV in New York earlier in April

Mighty Amazon (AMZN) is once again branching out in every direction. There’s the new Fire TV set-top box, a hotly rumored coming smartphone, the gradual rollout of its grocery business, Amazon Fresh, and such new services as Amazon Pantry, which lets customers buy boxes of everyday items like food and drinks at discounted shipping rates. Overseas, the company is pushing deeper into countries such as Spain, Italy, India, and China.

Earlier this week, Amazon signed a high-profile deal with HBO (TWX), paying a reported $300 million over three years to lock up exclusive streaming rights to such shows as The Sopranos, Deadwood, and The Wire.

The exuberant expansion phase has cut into Amazon’s famously thin profit margins but doesn’t appear to have hurt sales.

Amazon reported first-quarter earnings on Thursday, notching $19.74 billion in net sales. That beat Wall Street’s estimates of $19.43 billion and marked a 23 percent jump, compared with the same period a year ago. The company also reintroduced something its investors haven’t seen in a while: a profit. It reported earnings per share of 23¢, in line with estimates. Its stock inched ahead slightly in after-market trading.

“We get our energy from inventing on behalf of customers,” Chief Executive Officer Jeff Bezos said in a statement, “and 2014 is off to a kinetic start.”

Amazon shares have had a rough ride of late, dropping 17 percent since the start of the year in characteristically volatile trading. Investors have worried that the fast-growing company would get squeezed by the changing e-commerce landscape. With shipping costs on the rise, Amazon recently raised the price of its two-day Prime shipping service from $79 to $99. Its expansion its Amazon Fresh grocery service, along with its truck fleet, will allow the company to better control delivery of products to customers and lessen its reliance on UPS (UPS) and Federal Express (FDX).

Amazon Chief Financial Officer Tom Szkutak said the company wasn’t worried that the Prime price increase hurt signups to the service, which entitles members to free two-day shipping and a growing catalog of streamed TV shows and movies. “It’s early, but we’re encouraged by what we see so far,” Szkutak said, adding that subscriptions have continued to grow week-to-week. “Customers, we believe, are responding to a great service, in terms of the offering we have on the physical side, as well as the offering on the digital side.”

Amazon is also contending with an increasing number of states that collect sales tax on online purchases made by residents. A recent study from Ohio State University found that Amazon sales dropped by 10 percent in the 20 states for which sales taxes are being collected. For online purchases of more than $300, sales fell by 24 percent, according to the report.

Florida, the fourth-largest state in the country, will start collecting sales taxes on May 1.

Stone_190
Stone is a senior writer for Bloomberg Businessweek in San Francisco. He is the author of The Everything Store: Jeff Bezos and the Age of Amazon (Little, Brown; October 2013). Follow him on Twitter @BradStone.

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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $309.09 USD
    • 6.06
    • 1.96%
  • TWX
    (Time Warner Inc)
    • $86.71 USD
    • 1.13
    • 1.3%
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