Amazon.com posts first annual profit
January 29, 2004
By Allison Linn
Seattle - Amazon.com rode a wave of discounts and free shipping to strong fourth-quarter results, capping a year in which the internet retailer posted its first annual profit.
Net income for the three months to December was $73.2 million, or 17c a share, far better than the $2.7 million it earned in the same period of 2002.
Amazon said on Tuesday that some portions of its financial results were helped by exchange rate fluctuations, including product sales and gains from converting multiple currencies within the company. But those gains were offset by the negative impact exchange rates had on about $690 million in company debt that was in euros.
For the quarter, the results were hurt by $23 million because of currency fluctuations against the dollar. Without that, the company would have had earnings of $96.2 million for the period.
Sales for the three-month period were nearly $1.95 billion, up 36 percent from a year earlier.
Amazon chief executive Jeff Bezos said the company and customers benefited from year-round free shipping options and discount pricing. But analysts said some investors may be concerned Amazon has cut prices too deeply to gain customers.
"The question in some people's minds is: 'Do they need to lower prices by the degree to which they have been?'" said Dan Geiman, an analyst at McAdams Wright Ragen.
For the most recent quarter, the company said its net sales benefited by $98 million from fluctuations in foreign currency rates when compared with a year earlier.
Amazon said pro forma net income, which excludes certain items, was $125 million, or 29c a share, meeting the expectations of analysts polled by Thomson First Call. That compares with pro forma net income of $75 million, or 19c a share, in the fourth quarter of 2002.
Safa Rashtchy, an analyst at Piper Jaffray, said some investors might have been looking for the company's impressive sales growth to translate into bigger profits. But he said the company's price-cutting strategies were a smart way to build the business for the long term.
Amazon also logged its first annual profit. For the 12-month period, the firm reported net income of $35.3 million, or 8c a share, on revenue of $5.26 billion. That compared with a loss of $149.1 million, or 39c, on revenue of $3.93 billion in 2002.
Amazon said full-year results were hurt by $90 million because of the weak dollar's effect on foreign currency rates. Without it, the company would have had net income of more than $125 million.
Amazon said it expected sales of between $1.39 billion and $1.49 billion in the current first quarter, an increase of 28 percent to 38 percent over the first quarter a year ago. For the year, it projected sales of $6.2 billion to $6.7 billion.
Amazon also said its board had decided to buy back up to $500 million of company debt.
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