Amazon beats expectations on higher sales

NEWS Amazon.com posted a narrower-than-expected loss Tuesday, with sales up 21 percent from last year on strong performance from the e-tailer's Marketplace and books, music and video segments. The Seattle-based e-tailer reported a net loss of $23m (£16m), or 6 cents a share, compared with a net loss of $234m, or 66 cents per share, in the year-ago quarter. Net sales for the first quarter were $847m, up 21 percent from $700m a year ago. The company, which posted its first net profit of $5m in the fourth quarter, easily beat analysts' expectations for this quarter. Amazon was expected to report $805m in revenue and a loss of 9 cents per share, according to a consensus of analysts surveyed by First Call. Amazon closed trading Tuesday at $14.06, down 1.8 percent. The company's shares were up after hours. Leading to Amazon's strong quarter was the growth of Marketplace, a division that allows third parties sell goods on Amazon's site. Amazon said the unit accounted for 23 percent of total US orders, compared with 4 percent last year. Sales from Amazon's international operations jumped 71 percent to $226m. "The numbers look pretty good," said analyst David Kathman, of financial services company Morningstar. Kathman noted that Amazon benefited again this quarter from revaluing its euro-denominated debt, which resulted in an additional $6m. In the fourth quarter, the company said a favorable currency exchange was a key element of reaching profitability. Kathman anticipates upgrading Amazon's stock. "Growth, or lack of it, was one of my main concerns, but each of the two past quarters, Amazon's been very aggressive," Kathman said. "Their revenue, which had declined sequentially before the fourth quarter, has taken off again." The company also announced more discounts, giving a 30 percent discount on all books costing $15 or more, the company said in its earnings release. "Lowering price for customers...is a pillar of our strategy," Chief Executive Jeff Bezos said on a conference call. "This is our third price decrease in nine months. This is a big deal." Bezos claimed that Amazon now sells books at lower prices than any traditional bookseller, even with shipping charges. "If people are buying their books at someplace other than Amazon, they are doing so for something other than price," Bezos said. "They are wasting their money." The company also said it had improved its results on a pro forma basis, which excludes many costs, like amortisation of goodwill and stock-based compensation, and is watched by analysts who use it to gauge core operations. Amazon said it had exceeded its pro forma operating-profit goal for the quarter, making $25m on that basis, compared with a loss of $49m a year earlier. Including interest expenses on some $2bn in debt, the pro forma loss was $5m, or 1 cent per share, compared with $76m, or 21 cents per share, a year earlier, Amazon said. Analysts have been closely watching Amazon's business partnerships through its Services division. Under the agreements, business partners pay Amazon a fee and sometimes a share of sales, and in return, the e-tailer takes on a range of duties, from building Web stores to overseeing fulfillment of orders. For the first quarter, business through the high-margin division rose 25 percent to $52.7m. For the second quarter, Amazon said it expects net sales to be between $765m and $815m, or to grow between 15 percent and 22 percent. Operating income on a pro forma basis is expected to be between $5m and $15m.

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