Sales Jump Extends Amazon's Streak -- WSJ
July 29 2016 - 3:03AM
Dow Jones News
Retailer hits record net on strong growth, aided by Prime
loyalty and cloud services
By Greg Bensinger
Amazon.com Inc. on Thursday reported in its third consecutive
record profit, nearly doubling its prior high-water mark, and its
fifth straight quarter in the black.
Amazon's revenue jumped 31% including a 58% gain at its Amazon
Web Services cloud computing unit. The company also more than
doubled its operating margin, which historically has been razor
thin, and issued a cheery outlook for the coming quarter.
Shares of the company rose another 2% in after-hours trading
after finishing up $15.94 at $752.61 in 4 p.m. trading on the
Nasdaq Stock Market on Thursday.
"The accelerating revenue growth was a pleasant surprise," said
Colin Sebastian, a Robert W. Baird & Co. analyst. "But people
may be expecting quarters like this now."
The results show Amazon moving toward investors' long-held hope
of consistent profitability after a lengthy period of heavy
investments and quarterly losses. The Seattle company hasn't had
five consecutive profitable quarters since 2012 as it pumped much
of its revenue gains back into product development and operations,
including massive warehouses to speed products to customers.
Chief Financial Officer Brian Olsavsky said Amazon isn't
changing its investment philosophy, noting the company plans to add
18 new warehouses in the current quarter compared with six a year
earlier. "We're very happy with the operational performance of the
business," he said during a call with reporters.
Amazon's operating profit margin, a closely watched metric, was
4.2%. That is more than double the 2% year-earlier figure and a
sign that the company is controlling costs.
Overall, Amazon posted a second-quarter $857 million profit, or
$1.78 a share, compared with $92 million, or 19 cents a share, a
year earlier. Sales rose to $30.4 billion from $23.19 billion.
Analysts were expecting $1.11 a share on revenue of between $28
billion and $30.5 billion.
A big boost to results came from its Amazon Web Services cloud
computing division, which sells access to computing power over the
internet. AWS revenue in the quarter jumped to $2.89 billion, from
$1.82 billion a year earlier. The unit appears on track to exceed
Amazon Chief Executive Jeff Bezos's goal of reaching $10 billion in
sales this year.
That business is central to many investors' faith in the company
as it has become the go-to provider for startups, many government
agencies and large corporations. Amazon has pushed to gain
acceptance among large banks and technology firms, particularly as
Alphabet Inc. and Microsoft Corp. ramp up rival cloud computing
services.
In retailing, Amazon's power is spilling over the confines of
the online world. the company overtook Wal-Mart Stores Inc. by
market value a year ago and is pushing into brick-and-mortar
outlets with a bookstore in its hometown of Seattle and several
others planned across the U.S. The retailer is a major focal point
for brands and manufacturers betting that consumers are willing to
buy more staples online.
The $99-per-year Prime unlimited shipping membership has proven
a big driver of online sales. Amazon has beefed up the program with
exclusive streaming television shows and music as well as a
one-hour delivery service for some goods in a number of cities. It
said this month it will offer Prime for the first time to customers
in India, where it has pledged $5 billion in investment since
2014.
It also rolled out month-by-month subscription offerings for
both Prime and its streaming video service, which Mr. Olsavsky said
had been performing well, without providing specifics. Amazon is
expected to introduce a monthly unlimited streaming music service
in coming months.
Amazon has been casting about to find new ways to contain
shipping costs that have accelerated more quickly than sales in
recent quarters. That expense jumped 42% jump in this year's first
three months and 37% in 2015's holiday quarter. For the second
quarter, Amazon reported a 44% rise in shipping expenses to $3.36
billion.
The company has taken over more of its own delivery, including
the expensive final leg of a package's journey, known as the last
mile. It is leasing 40 planes to carry goods and bought branded
truck trailers.
As a result of its warehouse expansion, in particular, Amazon
boosted its employment to 268,900, up 9.6% compared with the first
quarter.
It forecast third quarter sales of between $31 billion and $33.5
billion, compared with analysts' views of $31.63 billion.
Write to Greg Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
July 29, 2016 02:48 ET (06:48 GMT)
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