October 25, 2012, 5:19 PM

Amazon grows in Q3, but not as fast

The biggest online retailer ended the quarter with a $244 million loss.

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For investors and observers used to seeing truly big jumps in sales for Amazon.com Inc. each quarter, earnings for the third quarter were a little more down to earth. The biggest online retailer also continues to spend heavily on acquisitions and growing its infrastructure and ended the quarter with a loss.

Contributing to the loss was a write-off of part of Amazon’s stake in LivingSocial, the Groupon competitor that e-mails discount offers to consumers.

For the third quarter ended Sept. 30, Amazon, No. 1 in the 2012 Internet Retailer Top 500, reported:

  • Total sales increased 26.9% year over year to $13.81 billion from $10.88 billion.
  • North American sales increased year over year 32.9% to $7.88 billion from $5.93 billion. North America accounted for 57.1% of sales in the third quarter.
  • International sales totaled $5.92 billion, up 19.8% from $4.94 billion in the first three quarters of 2011. International accounted for 42.9% of sales in the third quarter.
  • Worldwide sales of books, music and videos increased year over year 10.8% to $4.60 billion from $4.15 billion, while electronics and other merchandise increased 35.5% to $8.55 billion from $6.31 billion.
  • Net loss was $244 million compared with net income of $63 million in the prior year. The net loss included a $169 million write-down of Amazon’s stake in LivingSocial, which Amazon bought a stake of in 2010.
  • Spending on marketing increased 45.9% to $540 million from $370 million in the third quarter of 2011. Marketing expenses accounted for 3.9% of total sales.
  • Spending on technology and content increased 54.7% to $1.19 billion from $769 million in the third quarter of 2011. Technology expenses accounted for 8.6% of net sales.
  • Spending on fulfillment increased 34.8% to $1.51 billion from $1.12 billion in the third quarter of 2011. Fulfillment expenses accounted for 10.9% of net sales.
  • General and administrative spending rose year over year 31.4% to $230 million from $175 million in in the third quarter of 2011. General and administrative spending accounted for 1.7% of net sales.

While many retailers would relish a 27% increase in global sales and a 33% in North American sales, those were smaller increases than Amazon has reported in recent quarters. In the second quarter, Amazon reported a 36% increase in North American sales and 29% growth globally; in the first quarter, growth of 36% and 34%; and in the fourth quarter of 2011 sales increases of 43% and 41%.

“Our approach is to work hard to charge less,” CEO Jeff Bezos says. “Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point." While Amazon devoted a good part of its earnings press release to touting the advantages of its Kindle Fire HD tablet to Apple Inc.’s iPad, the e-retailer does not break out sales of its Kindle devices.

For the first three quarters, Amazon reported:

  • Total sales increased 30.0% year over year to $39.83 billion from $30.65 billion.
  • North American sales increased year over year 34.7% to $22.64 billion from $16.80 billion. North America accounted for 56.8% of sales in the first three quarters of 2012.
  • International net sales totaled $17.19 billion, up 24.2% from $13.84 billion in the first three quarters of 2011. International accounted for 43.2% of sales in the first three quarters of 2012.
  • Worldwide sales of books, music and videos increased year over year 14.1% to $13.43 billion from $11.77 billion, while electronics and other merchandise increased 38.7% to $24.70 billion from $17.80 billion.
  • Net loss was $137 million in the first three quarters of 2012, compared with net income of $454 million in 2011.
  • Spending on marketing increased 50% to $1.56 billion from $1.04 billion in the first three quarters of 2011. Marketing expenses accounted for 3.9% of net sales.
  • Spending on technology and content increased 57.3% to $3.22 billion from $2.05 billion in the first three quarters of 2011. Technology expenses accounted for 8.1% of sales.
  • Spending on fulfillment increased 42.5% to $4.16 billion from $2.92 million in the first three quarters of 2011. Fulfillment expenses accounted for 10.4% of net sales.
  • General and administrative spending rose year over year 39.7% to $662 million from $474 million in in the first three quarters of 2011. General and administrative spending accounted for 1.7% of net sales.

For the fourth quarter Amazon expects sales to range from $20.25 billion to $22.75 billion and operating income to range from a profit of $310 million to a loss of $490 million.

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