Amazon.com Inc. today reported fourth quarter results that far outpaced the e-commerce market as a whole, even if they fell short of the e-retailer’s recent Q4 results.
Amazon, No. 1 in the Internet Retailer Top 500 Guide, says net sales increased 18% in the fourth quarter to $6.70 billion from $5.67 billion in the fourth quarter of 2007. That was well short of the 42% and 34% growth rates Amazon reported for the fourth quarters of 2007 and 2006, respectively, but a strong showing given the 3% decline in online sales as a whole for November and December reported by web measurement firm comScore Inc.
It was a “solid quarter with better-than-expected revenue and EPS (earnings per share),” analyst Colin Sebastian, who follows Amazon for Lazard Capital Markets, wrote in a report on the results.
For all of 2008, Amazon says net sales were $19.17 billion, a 29% increase from $14.84 billion last year. Worldwide sales of books, music and videos increased 19.9% to $11.08 billion while electronics and other merchandise increased 44.7% to $7.54 billion. Revenue from other items—including sales of Amazon’s Kindle electronic book reader, fees from the Amazon Prime shipping program and advertising revenue—increased 41.5% to $542 million from $383 million. Operating income for the year grew 28% to $842 million.
In the fourth quarter, media sales increased by 9% and revenue from electronics and other merchandise by 31%. Operating income for the quarter was $272 million, little changed $271 million in Q4 2007, but Amazon says operating income would have grown 10% were it not for a $26 million swing from unfavorable changes in foreign exchange rates.
Amazon’s gross margin on sales in North America declined 114 basis points, or 1.14%, to 21.5%, reflecting the deep discounts Amazon offered during the recent holiday season when many retailers slashed prices to spur sales. Amazon also has expanded into 25 new categories in the past two years, from music downloads to office supplies, and typically features especially low prices in those categories as it establishes a foothold in those markets.
Amazon projected sales for the first quarter of this year would grow by between 9% and 19%.
“We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime,” said Jeff Bezos, founder and CEO of Amazon, referring to the program that offers consumers unlimited free shipping after paying an annual fee of $79. He said there was “unusually strong demand” for Amazon’s Kindle e-book reader, but the company did not provide details on sales of the Kindle, which was sold out for most of the fourth quarter. Amazon chairman and CEO Jeff Bezos did tell analysts on a conference call that consumers who buy the Kindle continue to buy as many physical books, but also buy 1.6 to 1.7 electronic books for every tangible book they buy.
The company also reported that active customer accounts exceeded 88 million in the fourth quarter, up 16% year over year. More than 1.5 million other merchants were selling through Amazon in the fourth quarter, up 18% from the prior year. Those third-party sellers accounted for 27% of unit sales, up from 26% a year earlier.
Amazon’s fourth quarter of sales of $6.7 billion exceeded the predictions of three analysts. Lazard Capital Markets predicted Q4 sales of $6.5 billion, RBC Capital Markets $6.4 billion and Citigroup $6.24 billion. Amazon itself had projected in its third quarter earnings release fourth quarter sales of between $6 billion and $7 billion.
During the conference call, an analyst asked Bezos if Amazon had benefited or would benefit in the future from the closings of many bricks-and-mortar stores. “The markets that we operate in are very large markets and there is room for lots of winners,” Bezos replied, according to a transcript provided by Seeking Alpha. “And so I don’t think there is going to be much impact to the long-term—continue to be a very competitive environment.”
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