July 24, 2014, 4:23 PM

Amazon’s Q2 revenue increases 23%

The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content and a $540 million increase in fulfillment spending. Amazon can now deliver on Sunday to 25% of the U.S. population, says Amazon CEO Jeff Bezos.

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Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, today posted a second quarter revenue gain of 23.2%. The e-retailer says that international sales increased 18% and that it took a net loss of $126 million as fulfillment spending grew 29%.

“We continue working hard on making the Amazon customer experience better and better,” says Jeff Bezos, founder and CEO of Amazon.com. “We’ve recently introduced Sunday delivery coverage to 25% of the U.S. population, launched European cross-border two-day delivery for Prime [and] launched Prime Music with over 1 million songs.”

Prime is the $99-a-year two-day shipping program offered by Amazon. The program also offers other benefits, such as steaming video and music as well as access to e-books.

Sales in North America grew faster than overseas for Amazon in the second quarter, and growth in electronics and general merchandise outpaced that of books, music and videos.

For the second quarter ended June 30, Amazon reported:

• Net sales of $19.34 billion, a 23.2% increase from $15.70 billion in the same quarter in 2013. Of that revenue, about $15.25 billion stemmed from Amazon selling products itself to consumers, what the e-retailer terms “net product sales”—up 19.6% year over year. The rest, nearly $4.09 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 38.6% from last year.

• North American net sales of nearly $12.00 billion, up 26.3% from approximately $9.50 billion for the second quarter of 2013. North America accounted for about 62.0% of sales in the second quarter of 2014, compared with 60.5% in the same period in 2013.

• International net sales totaling $7.34 billion, up 18.2% from about $6.21 billion in 2013. International accounted for about 37.9% of sales in the second quarter, compared with approximately 39.6% in 2013. One factor that served as a drag on global growth was an April 1 increase in the comsumption tax in Japan, to 8% from 5%, said Amazon chief financial officer Tom Szkutak during a conference call today with investors.

• Worldwide sales of books, music and videos increased 10.5% to about $4.84 billion from $4.38 billion, while electronics and other general merchandise increased 27.4% to nearly $13.28 billion from $10.42 billion in the same period in 2013.

• Net loss of $126 million compared with net loss of $7 million in the same period in 2013.

• Spending on marketing increased 39.7% to about $943 million from $675 million in the second quarter of 2013.

• Spending on technology and content increased 40.3% to about $2.23 billion from $1.59 billion.

• Spending on fulfillment increased 29.3% to $2.38 billion from $1.84 billion in 2013.

• General and administrative spending increased 31.8% year over year to $377 million from $286 million.

The third quarter also will bring more spending on video content, which Amazon uses to sweeten the appeal of its Prime program. "Video content ... we're ramping up the spend from Q2 to Q3 significantly," Szkutak said, adding that Amazon expects to spend some $100 million on producing its original content, including TV shows. "In terms of content, we've seen just more and more customers are streaming, more and more Prime members are streaming free content. We're seeing through our pipeline as customers join Prime, we're seeing that we have more and more customers taking free trials and then converting. Those customers are great customers. [They are] doing a lot of cross-shopping on physical products as well as converting to paid digital video and other digital products as well."

Other investments will focus on India and China, he said, declining to give details.

For the first six months of the year, Amazon reported:

• Net sales of $39.08 billion, a 23.0% increase from $31.77 billion in the same six-month period in 2013. Of that revenue, about $30.96 billion stemmed from Amazon selling products itself to consumers, up about 19.0% year over year. The rest, nearly $8.13 billion, came from commissions from outside merchants that sell on Amazon marketplaces, the Amazon Web Services cloud computing service and other smaller revenue sources. Those “net service sales,” as Amazon calls them, were up 41.4% from last year.

• North American net sales of about $23.86 billion, up 26.3% from approximately $18.89 billion for the same period of 2013. North America accounted for about 61.1% of sales in the first half of 2014, compared with 59.5% in the same period in 2013.

• International net sales totaling about $15.23 billion, up 18.2% from about $12.89 billion in 2013. International accounted for about 39.0% of sales in the second quarter, compared with approximately 40.6% in 2013.

• Worldwide sales of books, music and videos increased 9.0% to about $10.31 billion from $9.46 billion, while electronics and other general merchandise increased 27.5% to nearly $26.30 billion from $20.63 billion in the same period in 2013.

• Net income of $181 million compared with net loss of $101 million in the same period in 2013.

• Spending on marketing increased 38.2% to about $1.81 billion from about $1.31 billion in the second half of 2013.

• Spending on technology and content increased 39.1% to about $4.13 billion from $2.97 billion.

• Spending on fulfillment increased 29.5% to $4.70 billion from $3.63 billion in 2013.

• General and administrative spending increased 32.6% year over year to $704 million from $531 million.

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