Amazon's Profit More Than Doubles on 17% Rise in Sales--Update
April 25 2019 - 5:54PM
Dow Jones News
By Yoree Koh
Amazon.com Inc. notched a fourth-straight record profit as it
tamed costs, but its quarterly revenue grew at the slowest pace in
nearly four years.
The e-commerce company reported its first-quarter profit more
than doubled to $3.56 billion, or $7.09 a share, well above
analysts' consensus estimate of $4.70 a share, according to
FactSet.
At the same time, its revenue growth slowed for a
fourth-straight period, in part because of weak international
sales. Revenue grew 17% to $59.7 billion, compared with 43% growth
in the year-earlier quarter.
Ahead of what is expected to be a heavy spending period, the
company eased up. Expenses in the first quarter grew 12.6%, the
lowest percentage in at least a decade.
For the current quarter, Amazon projected revenue of between
$59.5 billion and $63.5 billion -- or 13% to 20% growth from a year
earlier. Analysts project on average $62.4 billion in revenue for
the second quarter.
Amazon's stock rose 0.6% in after-hours trading to $1,907 a
share. The shares are up about 24% this year.
Amazon started delivering record quarterly profits last year as
it eased spending while newer businesses like advertising and cloud
computing took off, helping to offset the lower margins of its
traditional retail business.
But its revenue growth has been decelerating quickly, partly
because of how massive Amazon has become, but also due to some
trouble spots. The company has run into problems overseas,
particularly in India, where new e-commerce rules favor domestic
companies over foreign giants like Amazon.
Amazon also recently pulled the plug on its third-party online
marketplace in China after struggling to battle the incumbents
there.
Its international sales rose 9% in the first quarter, compared
with 19% growth in the fourth quarter.
Amazon's booming advertising business didn't appear to fare as
strongly as it had in prior quarters. Revenue for its "other"
category -- which is primarily derived from advertising -- rose 34%
to $2.72 billion in the first quarter after nearly doubling
year-over-year in the prior quarter.
Amazon also is pushing further into physical retail with
cashier-less Amazon Go stores and bookstores -- and with little
revenue growth to show for it. Its Whole Foods grocery chain, which
it acquired in 2017, makes up the bulk of the category, where
revenue rose only 1% in the latest period. In April, Amazon
implemented a third round of price cuts on grocery items, primarily
on produce and meats, and said it will introduce more discounts to
Amazon Prime members.
Its biggest and brightest cash cow -- the cloud computing arm
called Amazon Web Services -- continues to churn out profits. Sales
rose 41% to $7.7 billion, while operating income jumped 59% to
$2.23 billion.
In his annual shareholder letter earlier this month, Chief
Executive Jeff Bezos pronounced his own bullish stance on the
cloud-computing business. Still, after an early head start that has
made it the dominant player in renting computing power to
businesses and government agencies, Amazon is confronting stiffer
competition from Microsoft Corp. and Alphabet Inc. On Wednesday,
Microsoft said quarterly revenue at its Azure cloud-computing
business rose 73% from a year earlier.
While Amazon demonstrated stronger financial discipline over the
past year, it was widely expected to begin investing heavily again
in its disparate businesses. The company had spent mightily in
prior years to build out its warehouses to meet surging retail
demand and to branch into new industries such as cloud computing,
filmmaking and groceries.
In fact, on the company's fourth-quarter analyst call, Chief
Financial Officer Brian Olsavsky warned of a pickup in spending.
That doesn't appear to have happened yet. And it isn't clear from
Amazon's guidance for operating income whether that will change in
the second quarter. It expects between $2.6 billion and $3.6
billion in operating income, compared with $3 billion a year ago
and analysts' consensus estimate of $3.11 billion.
Amazon's employee count, which totaled 630,600, fell by nearly
17,000 employees during the latest quarter. That represents only
the second sequential decline and steepest drop since at least
2010.
Write to Yoree Koh at yoree.koh@wsj.com
(END) Dow Jones Newswires
April 25, 2019 17:39 ET (21:39 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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