/ 24 April 2002

Amazon net loss shrinks, sales climb 21%

AMAZON.COM on Tuesday posted a smaller first-quarter net loss and beat Wall Street expectations as the online megastore’s sales rose a better-than-anticipated 21%.

Sliding back into the red after a surprise profit its previous, busy holiday shopping quarter, Amazon reported a net loss of $23 million, or 6 cents a share, compared to a net loss of $234 million or 66 cents a share a year earlier.

Revenues in the first quarter grew 21% to $847 million from $700 million a year earlier. Analysts had expected revenue of about $805 million, according to Wall Street tracking firm Thomson Financial/First Call.

Shares in the Seattle company rose nearly 8% in after-hours trading to $15,15 after the financial results were announced. In regular Nasdaq trade the stock fell 1,8% to close at $14,06 on Tuesday.

On the pro forma basis watched by Wall Street analysts as a gauge of the company’s core retail business, Amazon said it lost $5 million, or 1 cent a share, compared to expectations of a loss between 7 and 12 cents per share.

That is smaller than the net loss of $23 million because it excludes stock-based compensation — a non-cash cost that has risen along with Amazon’s share price — and changes in the market value of its euro-denominated debt.

”Overall it was definitely a strong quarter for them,” said Dan Geiman, an analyst with brokerage McAdams Wright Ragen who has a ”hold” rating on the stock.

RAISING GUIDANCE

The retailer also raised it guidance for its current, second quarter, saying it expected sales of $765 million to $815 million, up as much as 22% over a year earlier and better than analysts’ forecasts of about $750-million.

Amazon also said it expected to show a pro forma operating profit of $5 million to $15 million for the second quarter. It did not forecast a net profit or loss, but the company lost 16 cents a share in the second quarter of 2001.

For the full year, Amazon forecast sales would grow by more than 15%, with pro forma operating income of more than $100-million.

”We are ahead of schedule financially,” Chief Financial Officer Warren Jenson said in a statement.

The solid results meant the company would cut prices, offering 30% off books of $15 or more, Amazon said. Previously, the discount only affected books over $20.

”That they are still able to lower prices, it is almost a Wal-Mart-like strategy in being price aggressive and still able to make a profit,” said Deutsche Bank Alex. Browne analyst Jeetil Patel, who rates the stock a ”buy”.

”The company is (operationally) profitable, is scaling rapidly, and passing the savings back to customers, but what’s next is to continue to generate significant unit growth and continue to expand globally,” Patel said.

INTERNATIONAL SHINES, BOOKS STRONG

Amazon also said it had improved its results on several pro forma metrics that exclude various costs like amortisation of goodwill and restructuring charges.

Pro forma operating profits were $25-million, compared a loss of $49-million a year earlier, and beating Amazon’s own guidance for a loss of between $16 million and break-even.
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Jenson credited the better operations to a combination of more customers — many attracted by free shipping on orders over $99 — as well as more sales of high-margin used items and ongoing efficiency gains.

”They are continuing to drive down those operating costs quarter after quarter,” said Wells Fargo Securities analyst Allyson Rodgers, who has a ”market perform” rating and $15 price target on the stock.

Sales in Amazon’s core books, music and video segment, which hummed to life in the quarter again after a worrying decline, rose 8% to $443 million.

Sales from stores in Britain, Germany, France and Japan that make up Amazon’s international segment, which was expected to show strong growth, rose to $225.5 million, up 71 percent from a year earlier. Electronics, tools and kitchenware sales rose 8 percent to $126,2-million, while services, a small but high-margin business for Amazon, rose 25% to $52,7-million.

”It was just a nice quarter to grow sales and reaccelerate book business and show progress on their profitability track,” Rodgers said. -Reuters