Amazon’s Q1 sales rise 20% year-over-year to $2.3 billion

Net sales at Amazon.com Inc. rose 20% to $2.28 billion for the first quarter ended March 31, up from $1.9 billion in the year-ago period, as net income fell 35% to $51 million.

Q1 North America segment sales, comprised of Amazon’s U.S. and Canadian sites, grew 21% year-over-year to $1.25 billion from $1.03 billion, while sales in its international segment grew 18% to $1.03 billion from $87.3 million. Its international segment is comprised of its U.K., German, Japanese, French and Chinese web sites. Amazon is No. 1 in the Internet Retailer Top 400 Guide to Retail Web Sites.

Electronics and other general merchandise sales represented 28% of worldwide net sales, up from 25% a year ago.

The average number of daily purchases on Amazon has grown 28% over the last several months, to 232,000 in February from 182,000 last September, according to Nielsen/NetRatings. Amazon’s fastest-growing segment in terms of traffic was its Internet Movie Database, which had an average monthly unique audience of 19 million visitors in Q1, up 65% from 11.5 million a year ago, Nielsen said, adding that Amazon’s overall average monthly unique audience grew 26% in Q1, to 47.8 million from 38 million a year ago.

Amazon said its 35% drop in overall net income stemmed largely from an unusual gain of $26 million in Q1 2005 related to an accounting treatment. Its performance was also impacted by $8 million in extra costs due to changes in foreign exchange rates, which caused operating income to drop 2% year-over-year to $106 million.

Operating cash flow grew 38% to $724 million for the trailing 12 months, up from $523 million for the 12 months ended March 31, 2005, while free cash flow grew 20% to $501 million from $417 million.

Operating expenses in the first quarter grew 26% to $441 million from $350 million a year ago, including an 18% rise in fulfillment expenses to $193 million, a 20% rise in marketing expenses to $54 million, and a 59% increase in technology and content to $146 million.

Amazon CEO Jeff Bezos attributed the increase in Q1 net sales partly to the company’s Amazon Prime service, which launched in February 2005. For a $79 annual fee, Amazon Prime offers two-day shipping for no extra charge on more than 1 million items.

"We`re pleased to see strong quarter-to-quarter sequential growth for new Amazon Prime subscriptions," he said. "This sequential growth comes off our biggest holiday season ever, and one where new subscriptions to Amazon Prime more than doubled from November to December."