Amazon’s Q2 sales rise 22% to $2.14 billion
Net sales at Amazon.com rose 22% to $2.14 billion in the second quarter, compared with $1.75 billion in the year-earlier period, while net income fell 58% to $22 million, down from $52 million in 2005. Amazon attributed the earnings drop to investment in new technologies and free shipping deals.
Amazon’s Q2 North American segment sales, comprised of its U.S. and Canadian sites, grew 21% year-over-year to $1.16 billion from $960 million. Sales in its international segment—comprised of its U.K., German, Japanese, French and Chinese sites—totaled $982 million in the quarter, up 24% from $793 million.
Electronics and other general merchandise accounted for 29% of worldwide net sales, up from 26% in 2005’s second quarter.
Web traffic to Amazon.com increased 20% year-over-year to a 3-month average monthly unique audience of 45.5 million in the second quarter from 38 million, according to Nielsen/NetRatings. Amazon was the No. 1 online retailer, excluding auction sites, in May, with nearly 5.1 million purchases, according to Nielsen/NetRatings MegaView Online Retail.
Amazon’s fastest-growing segment in terms of traffic was its Internet Movie Database, which had an average monthly unique audience of 18.5 million visitors, up 53% from 12.1 million a year ago, Nielsen said.
Operating cash flow dropped 2% to $610 million for the trailing 12 months, compared with $624 million for the trailing 12 months ending June 30, 2005. Free cash flow dropped 23% to $375 million for the 12 month, compared with $486 million a year earlier.
Amazon said the primary driver of the decline in free cash flow was increased spending on technology and content. Free cash flow also was reduced by a $40 million patent litigation settlement in the Q3 2005, $34 million from excess tax benefits for stock-based compensation now classified as financing cash flows, and investments in additional fulfillment capacity.
Operating income fell 55% to $47 million in the second quarter, compared with $104 million a year earlier, due to technology and content investments, lower prices including free shipping and the Amazon Prime membership program, and $20 million from a contract termination and related fee dispute, Amazon said. Amazon Prime, launched in February 2005, offers for a $79 annual fee two-day shipping for no extra charge on more than 1 million items.
“We’re investing in Amazon Prime and future technology initiatives,” said Jeff Bezos, founder and CEO. “Amazon Prime gets customers their products fast, and our investments in technology position us to innovate in seller platforms, web services, and digital. We’re looking forward to the coming decrease in our year-over-year growth rates in technology spending in the second half of 2006.”
Amazon.com says it expects third quarter net sales of between $10.15 billion and $10.65 billion, or growth of between 20% and 25%.
Amazon is No. 1 in the Internet Retailer Top 500 Guide to Retail Web Sites.
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