Amazon delivers dazzling profits, as well as USD 20 Prime hike


Business, Companies

The forecast beat expectations on Wall Street, sending shares up 7 per cent to a new record high. 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. 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 per cent to a new record high in after-hours trade and adding USD 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 USD 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 per cent to USD 51.0 billion in the quarter, topping estimates of USD 49.8 billion, according to Thomson Reuters.

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 USD 119 from USD 99 for US members this spring. The fee hike is expected to add a windfall to Amazon’s subscription revenue, already up 60 per cent in the first quarter at USD 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 USD 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 was an unusually large bright spot during the quarter, with sales in the category, which includes some other items, growing 139 per cent to USD 2.03 billion. This included USD 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 D.A. Davidson analyst Tom Forte. “They are just getting started here.”

Amazon said it expects operating profit this quarter between USD 1.1 billion and USD 1.9 billion, up from USD 628 million a year earlier. Analysts were expecting USD 1.01 billion, according to analytics firm FactSet.

Spending on video, internationally:

Amazon Web Services (AWS), which handles data and computing for large enterprises in the cloud, won new business and saw its profit margin expand. It posted a 49 per cent rise in sales from a year earlier to USD 5.44 billion, beating estimates.

Amazon remains the biggest in the space by revenue, and its stock trades at a significant premium to cloud-computing rival Microsoft Corp.

Amazon’s shares have also outperformed the S&P 500, rising 30 per cent this year as of Thursday’s market close, compared with the S&P’s less than 1 per cent decline.

Notorious for running on a low profit margin, Amazon has still reaped rewards for shareholders as it has bet on new services like voice-controlled computing and has expanded across continents and industries.

Global headcount was up 60 per cent from a year earlier at 5,63,100 full-time and part-time employees, thanks to a hiring spree and an influx of workers from Whole Foods Market.

The company plans to increase its video content spending this year, Amazon’s Olsavsky said, with a prequel to “The Lord of the Rings” in the works. The third quarter will also see extra spending to prepare for the busy holiday season.

Amazon is working with JPMorgan Chase & Co and Berkshire Hathaway Inc to determine how to cut health costs for hundreds of thousands of their employees.

And it is expanding its retail footprint outside the United States, particularly in India. Amazon’s international operating loss grew 29 per cent to USD 622 million in the first quarter.