Amazon Nearly Tops Itself

Citing strong sales in electronics and in its overseas efforts, Amazon.com
Inc. nearly beat its own forecast of several weeks ago, posting
first quarter net sales of $700.4 million, up 22 percent.


Pro forma operating loss was $49 million or 21 cents per share, compared with
a pro forma operating loss of $99 million or 35 cents a share in the same
period a year earlier. Amazon execs reiterated earlier guidance that it
expects to achieve pro forma operating profitability by the end of the fourth
quarter.


Sales for the quarter compared to sales of $574 million in the first quarter
of 2000. Electronics was the company’s second-biggest U.S. sales venue for
the first quarter, while net sales from Amazon.com’s four international sites
rose to $132 million, an increase of 76 percent from the first quarter of
2000.


Excluding $114 million, which represents the first quarter’s portion of
previously announced restructuring and other charges, and excluding a net
gain of $23 million for certain other items, the more fully diluted net loss
for the quarter would have been $143 million, or 40 cents per share.


“This was another quarter of significant progress for Amazon.com — we are on
track to reach our objective of pro forma operating profitability in the
coming December quarter,” said Warren Jenson, Amazon.com’s chief financial
officer.


“Cumulative customer accounts grew to over 32 million (during the first
quarter), which includes 6 million international customers,” said Jeff Bezos,
founder and CEO of Amazon.com. “Again this quarter our customers responded
with particularly strong purchase levels in our electronics, tools and
kitchen stores and from our international sites.”


Amazon said
on April 9
that excluding goodwill, stock-based compensation expenses and
other costs, the company would report revenues of more than $695 million and
a loss of 22 cents a share or less. Wall Street analysts had been forecasting
a loss of 25 cents.


Amazon said it ended the first quarter with $643 million in cash and
marketable securities.


The company took restructuring and other charges of $114 million during the
first quarter of 2001 related to the 1,300 jobs that Amazon cut made earlier
this year and the closing of a warehouse, and Amazon said it expects to take
additional restructuring and other charges of over $50 million during the
second quarter of the year.


Jenson said in a conference call that for the second quarter, net sales are
expected to be between $650 million and $700 million and that pro forma
operating losses are expected to be flat to slightly improved from the first
quarter. For the year, net sales are expected to increase between 20 and 30
percent over 2000.


Jenson reiterated earlier guidance that pro forma operating profitability is
expected to be achieved in the fourth quarter.


Before the release came out after Tuesday’s closing bell on Wall Street,
Goldman, Sachs issued an advisory to clients saying that “results should get
better from here with continuing improvements in margins via productivity
savings and operating leverage while meeting top-line estimates.” GS
reiterated its market outperform rating.


Amazon’s gross margin expansion and operating income that was achieved two
quarters ahead of expectations “increase the probability of Amazon reaching
profitability in the fourth quarter of 2001 despite our estimate for 2001
top-line growth of just 25 percent,” GS said.


The advisory said that several execution hurdles remain, particularly
fulfillment. “However, in our view, there are significantly fewer ‘ifs’ than
in the past,” GS said, noting that the demise of eToys alone presents Amazon
with a $1 billion opportunity.


On Monday Amazon stock got a boost when a Deutsche Banc Alex. Brown analyst
said he expects today’s earnings report from the Internet retailer to show
that “fundamentals remain intact” and that there’s “light at the end of the
tunnel.”


Amazon closed Tuesday at $15.68, down, 52 cents, in advance of the full
earnings release. However the stock has been climbing since the April 9
announcement, when it soared almost $3 in one day. Its 52-week low is $8.10.

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