Amazon once more turned in sales numbers that cement its ranking as the world’s biggest online retailer. In 2005, Amazon recorded total sales of $8.5 billion, up 23% from $6.9 billion in 2004. It had net income of $359 million compared to $588 million.
In 2005, Amazon, No. 1 in the Internet Retailer Top 400 Guide to Retail Web Sites, also took a number of steps to grow its mushrooming retail base. For instance, Amazon Prime, Amazon’s first-ever membership program, was introduced in February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement. "Subscriptions to Amazon Prime more than doubled from November to December," says founder and CEO Jeff Bezos. "Amazon Prime members get 'all-you-can-eat' two-day shipping for free."
For the fourth quarter, Amazon increased sales 17% to $2.98 billion compared with sales of $2.54 billion in Q4 2004. Net income was $199 million in Q4 2005 compared with net income of $347 million from the same quarter in 2004. In 2005, overseas sales accounted for 45% of total sales, up slightly from 44% in 2004.
In 2006, Amazon is projecting that its sales will range from $9.85 billion to $10.45 billion.
Despite the fact that Amazon reported lower net income for both the fourth quarter and the full year, the news didn't surprise Wall Street analysts. "There was little new in Amazon's quarter or guidance as both followed Amazon's trend for the past several quarters, which is to meet guidance and lower margin expectations," says Safa Rashtchy, a senior research analyst with Piper Jaffery, in a recent research brief.
Piper Jaffery expects Amazon to continue to spend as much as 6% of total revenues on new technology and content, which will have an ongoing impact on profit margins. "While this may be a slower increase than we saw in 2005, this takes Amazon further away, not closer, to its goal of double-digit margins," Rashtchy says.
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