Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
But higher marketing, fulfillment and technology expenses cut into net income.
Amazon.com Inc. generated $13.19 billion in sales worldwide during the first quarter, but the e-retailer’s income decreased more than 35% due to significantly higher spending on marketing, fulfillment, and technology and content, according to Amazon’s latest financial report, released today.
For the first quarter ended March 31, Amazon, No. 1 in the Internet Retailer Top 500 Guide, reported:
•Total sales increased 33.8% to $13.19 billion from $9.86 billion in Q1 2011.
• North American sales increased year over year 35.8% to $7.43 billion from $5.47 billion. North America accounted for 56.3% of sales in Q1 2012.
• International net sales totaled $5.76 billion, up 31.2% from $4.39 billion in the first quarter of 2011.
• International accounted for 43.7% of sales in Q1 2012.
• Worldwide sales of books, music and videos increased 18.9% to $4.71 billion from $3.96 billion, while electronics and other merchandise increased 42.8% to $7.98 billion from $5.59 billion.
• Net income decreased year over year 35.3%to $130.0 million from $201.0 million.
• Spending on marketing increased 46.8% to $480.0 million from $327.0 million in Q1 2011. Marketing expenses accounted for 3.6% of net sales in the first quarter.
• Spending on technology and content increased 63.2% to $945.0 million from $579.0 million in the first quarter of 2011. Technology expenses accounted for 7.2% of net sales.
• Spending on fulfillment increased 51.5% to $1.295 billion from $855.0 million in Q1 2011. Fulfillment expenses accounted for 9.8% of net sales.
• General and administrative spending increased year over year 50.4% to $200.0 million from $133.0 million in Q1 2011. General and administrative spending accounted for 1.5% of net sales.
Amazon had a busy first quarter. Between January and the end of March the e-retailer agreed to start collecting sales tax from consumers in Indiana beginning in 2014 and in Delaware in 2013, and announced plans to build additional distribution centers in Indiana, Delaware and South Carolina. In February it launched an online shopping service called Junglee.com in India. It March, Amazon announced it will buy fulfillment services provider Kiva Systems for $775.0 million and also lowered prices for its web-hosted services that are offered to retailers and other companies.
Amazon increased its full-time and part-time workforce by 73.1% year over year, to 65,600 in Q1 2012 from 37,900 in Q1 2011. The vast majority of the hires have been in operations and customer service roles, said Amazon chief financial officer Tom Szkutak today during a conference call discussing the results. Since January, Amazon also has announced plans to build 13 more fulfillment centers, largely driven by growth in its Fulfillment by Amazon service, in which Amazon stores and ships products on behalf of its Marketplace sellers and e-retailers. Seven of the announced fulfillment centers are in the United States, and six are in other countries. 39% of the total product units sold on Amazon during the first quarter were sold by Marketplace sellers, Szkutak said, noting that unit growth was up 61% year over year.
Amazon says it expects net sales in the second quarter to range from $11.90 billion to $13.30 billion.