WASHINGTON – Amazon.com Inc more than doubled its profit on Thursday and predicted strong spring results as the world’s biggest online retailer raised the price for US Prime subscribers, added US football games and touted its cloud services for business.
The results showed the broad strength of the company, which has been expanding far beyond shipping packages, the business that has drawn the ire of US President Donald Trump.
The forecast beat expectations on Wall Street, sending shares up 7% to a new record high in after-hours trade and adding $8 billion to the net worth of Jeff Bezos, Amazon’s chief executive and largest shareholder.
Seattle-based Amazon is winning business from older, big box rivals by delivering virtually any product to customers at a low cost, and at times faster than it takes to buy goods from a physical store. It is expanding across industries, too, striking a $130 million deal to stream Thursday night games for the US National Football League online and working to ship groceries to doorsteps from Whole Foods stores nationwide.
Sales jumped 43% to $51.0 billion in the quarter, topping estimates of $49.8 billion, according to Thomson Reuters I/B/E/S.
Amazon’s fast ascent has made it a lightning rod for the ire of Trump. Bezos privately owns the Washington Post, which Trump has described as Amazon’s “chief lobbyist.” Bezos has no involvement in news coverage, the paper’s top editor has said. Trump has also claimed without evidence that Amazon is costing the US Postal Service money and ordered a task force to investigate.
Success is “the best revenge that Bezos can get against the administration for its veiled threats about sales taxes and not paying its fair share,” said Wedbush Securities analyst Michael Pachter.
Prime, Amazon’s loyalty club that includes fast shipping, video streaming and other benefits, has been key to Amazon’s strategy. Its more than 100 million members globally spend above average on Amazon.
The company announced Thursday it will increase the yearly price of Prime to $119 from $99 for US members this spring. The fee hike is expected to add a windfall to Amazon’s subscription revenue, already up 60% in the first quarter at $3.1 billion.
“We do feel it’s still the best deal in retail,” Brian Olsavsky, Amazon’s chief financial officer, said on a call with analysts. He said the number of items Prime members can get within two days had grown fivefold since the last price increase four years ago.
Despite the surge in shopping, Olsavsky gave credit for Amazon’s $1.6 billion profit last quarter to two younger businesses: advertising and Amazon Web Services.
Revenue from third-party sellers paying to promote their products on Amazon.com was an unusually large bright spot during the quarter, with sales in the category, which includes some other items, growing 139% to $2.03 billion. This included $560 million from an accounting change.
“Advertising is an important and very profitable bucket of revenue for Amazon and is also growing at a fast rate,” said DA Davidson analyst Tom Forte. “They are just getting started here.”
Amazon said it expects operating profit this quarter between $1.1 billion and $1.9 billion, up from $628 million a year earlier. Analysts were expecting $1.01 billion, according to analytics firm FactSet.
Article sourced from Reuters-
Photo Credit- AFP