Amazon Reports A 22 Percent Increase In Revenue In Second Quarter
By Sam Lewis
Online marketplace leader also reports $7 million net loss
On Thursday, July 25th, Seattle-based internet retailer Amazon released its second quarter report for 2013 where it announced gains in revenue of 22 percent versus the same report for last year. Net sales in the second quarter of 2013 totaled $15.7 billion compared with $12.83 billion in the second quarter of 2012. However, the gain in revenue comes along with a loss of $7 million, or 2 cents per share. Analysts were expecting profits of $27.4 million, or 4 cents per share, in the second quarter.
Amazon chalks up the loss to costly investments in marketing up 25.7 percent to $675 million from $537 million in the second quarter of 2012, and technology and digital content, up 46.6 percent to $1.586 billion from $1.082 billion. “This past quarter, our top 10 selling items worldwide were all digital products — Kindles, Kindle Fire HDs, accessories, and digital content,” says Amazon CEO Jeff Bezos. “Prime Instant Video (PIV) has surpassed 40,000 titles.” Amazon Prime is a service the company offers for $79 per year that includes free shipping on items ordered through Amazon and unlimited instant streaming of thousands of movies and TV shows with PIV. Amazon has made a significant investment into its PIV program — $500 million was added to technology development and media content, now totaling $1.59 billion — most likely in hopes of keeping pace with Netflix.
Expansion of fulfillment centers can also account for portions of Amazon’s second quarter loss. Spending on fulfillment went up 35.5 percent to $1.837 billion from $1.356 billion in 2012. In the last year, Amazon has opened 20 warehouses worldwide, with eight of those fulfillment centers being in the U.S. The expansion of fulfillment centers took place “near major metropolitan areas (NY, San Francisco and San Antonio/Austin), which we think is a step toward further improving shipping times and potentially expanding Fresh or same-day delivery services," reads a research note on Friday from Wells Fargo Securities. The increase of fulfillment centers has also lead to the creation of 5,000+ jobs domestically.
Despite the reported loss, Amazon sales are on the increase. The report showed international net sales had grown 12.7 percent to $6.2 billion from $5.5 billion in the second quarter of 2012. Worldwide sales of books, music, and video also grew, up 6.7% to $4.397 billion from $4.119, while electronics sales bumped up 27.6 percent to $10.415 billion from $8.161 billion in the same period of 2012. As far as North America is concerned, net sales climbed nearly 30 percent to nearly $9.5 billion, compared to $7.326 billion in 2012. Sales for Amazon are up internationally, as well as domestically. The loss appears just to be a necessary investment and a growing pain for the flourishing e-commerce giant which is seeking to further assert and expand its already dominant position in the world of online retail.