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Amazon.com Sales Soar 41 Percent, Baron’s Warns of Stock Decline

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MAIN NEWS HEADLINES
July 31 – August 7, 2008 Edition

Amazon.com Sales

Soar 41%, Baron’s

Warns of Stock Decline

SEATTLE/7/27/2008–Amazon.com, Inc. (NASDAQ: AMZN) July 23 announced a 41% net sales increase to $4.06 billion in the second quarter, ended June 30, 2008, compared with $2.89 billion in second quarter 2007. Excluding the favorable impact of foreign exchange rates for the quarter, net sales grew 35% compared with second quarter 2007.

Operating income increased 86% to $217 million in the second quarter compared with $116 million in second quarter 2007. Excluding the $17 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 71% compared with second quarter 2007. Included in the second quarter 2008 operating income is a $53 million non-cash gain recognized on the sale of our European DVD rental assets. Net income increased 102% to $158 million in the second quarter, or $0.37 per diluted share, compared with net income of $78 million, or $0.19 per diluted share, in second quarter 2007.

Despite the good news, Reuters reported July 27 that Amazon.com stock may be due to decline, because of narrowing margins. This may lead Credit Suisse to offer an options play as a way to profit from any weakness, according to a recent report in Barron’s financial newspaper. Credit Suisse said Amazon’s earnings benefited from strong international sales growth — a fact that is "somewhat misleading" as the weak dollar helped, lifting overseas sales, the paper said.

Meanwhile, Amazon.com CEO Jeff Bezos said "Customers continue to take advantage of our low prices, free shipping and Amazon Prime. Amazon Prime membership costs less than a tank of gas – more and more customers are joining the program and enjoying its benefits."

Highlights from Amazon’s financial report:

— Worldwide Media sales grew 31% to $2.41 billion in second quarter 2008, compared with $1.83 billion in second quarter 2007.

— Worldwide Electronics & Other General Merchandise sales grew 58% to $1.53 billion in second quarter 2008, compared with $0.97 billion in second quarter 2007, and increased to 38% of worldwide net sales compared with 34%.

— North America segment sales, representing the Company’s U.S. and Canadian sites, were $2.17 billion, up 35% from second quarter 2007.

— International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $1.89 billion, up 47% from second quarter 2007, and increased to 47% of worldwide net sales compared with 45%. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 34%.

— Amazon.com customers can now take advantage of Bill Me Later, a new alternative payment method. Bill Me Later’s next-generation payments service provides customers another convenient payment option when shopping on Amazon.com.

Looking ahead to the third quarter, the company expects sales to be between $4.200 billion and $4.425 billion, or to grow between 29% and 36% compared with third quarter 2007.

Operating income is expected to be between $115 million and $160 million, or between 6% decline and 31% growth compared with third quarter 2007. This guidance includes approximately $80 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

For the full year, net sales are expected to be between $19.35 billion and $20.10 billion, or to grow between 30% and 35% compared with 2007.

Operating income is expected to be between $745 million and $920 million, or to grow between 14% and 40% compared with 2007. This guidance includes approximately $295 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Amazon.com, Inc. (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection of just about anything.

Amazon and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn.