April 26, 2011, 4:39 PM

Amazon’s North American sales jump nearly 45% in Q1

Electronics and general merchandise sales were especially strong.

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Amazon.com Inc. reported today another blockbuster quarter of sales growth, with sales on its U.S. and Canadian sites increasing 44.6% to $5.47 billion in the first quarter from $3.78 billion in the same period last year. Globally, sales grew 38% to $9.86 billion from $7.13 billion.

The gains were especially strong in North America in electronics and general merchandise, which increased 63% to $3.30 billion from $2.02 billion. Part of those gains come from Amazon’s late 2010 acquisition of Quidsi, parent company of Diapers.com and other e-retail sites, which was on track to generate $300 million in annual revenue.

In the media category—mostly books, music and film DVDs—Amazon’s North American sales grew 18% to $1.89 billion from $1.60 billion. Amazon is No. 1 in the Internet Retailer Top 500 Guide.

Amazon projected second quarter revenue growth of between 35% and 47% to a range of $8.85 to $9.65 billion.

Amazon’s net income decreased 33% to $201 million in the first quarter from $299 million a year earlier.

Chief financial officer Thomas Szkutak noted in a call with analysts today that the decline in net income reflected in part $23 million in additional stock-based compensation compared with the first quarter of 2010. He also pointed to Amazon adding 13 fulfillment centers worldwide in 2010 to accommodate growth. Szkutak added that Amazon has disclosed plans to add nine more distribution centers in 2011, about half in North America, and may well add more if sales growth continues at the current pace.

Amazon also increased its spending in other areas. Marketing expenses increased nearly 63% to $327 million; technology and content spending was up 58% to $579 million; and total spending on fulfillment increased 56.6% to $855 million.

Szkutak provided little detail about last week’s performance issues at Amazon Web Services, which provides computing capacity and data storage for other companies. “The team is working very deliberately on the way to identify and validate and fix the root causes associated with this incident,” he said.

Asked about the potential impact on Amazon if the online retailer were required to collect sales tax in all states, Szkutak observed that Amazon already collects tax on purchases in geographies that account for more than half of its revenue. He did not directly answer a question about whether the sales tax issue would impact where Amazon places distribution centers. States increasingly are arguing that having a fulfillment center in a state constitutes a physical presence that triggers tax-collecting requirements; Amazon has said it will close a distribution center in Texas over such a dispute.

Amazon reported 51% growth year over year in units sold in the first quarter, up from 43% unit growth in the fourth quarter of 2010. Szkutak said that largely reflected growth in digital content, such as electronic books for the Kindle e-book reader.

"Unit growth of 51% underscores health of the Amazon platform," Lazard Capital analyst Colin Sebastian wrote in a note to investors about Amazon's Q1 results headlined "Same story, different quarter." Sebastian pointed to the growth of e-books and other digital content as driving the unit growth and higher sales in the media category.

In his comments to analysts, Szkutak also noted that the earthquake and tsunami in Japan slowed sales in that country and trimmed about 0.5% from international growth.

Amazon continues to spend more on shipping, in part to support its Amazon Prime program that offers consumers free shipping for a $79 annual fee. The e-retailer's total shipping costs increased nearly 52% to $786 million in Q1 2011. Net shipping costs, after subtracting revenue, was up nearly 69% to $456 million.

For the first quarter of 2011, Amazon also reported:

  • International sales grew 31% to $4.39 billion from $3.35 billion. Electronics and general merchandise grew 53.5% to $2.29 billion from $1.49 billion; media sales grew 13% to $2.07 billion from $1.83 billion.
  • Global sales growth would be 36% when excluding $144 million in favorable impact in changes in foreign exchange rates.
  • North America represented 55.4% of sales and international sales 44.6%.
  • There are some 2 million merchants selling on the Amazon marketplace and they represent about 33% of listings.
  • Amazon counted some 137 million active customers in the first quarter.
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