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Amazon swings to cost-hit loss but sales flourish

Amazon’s sales may be rising but it swung to a costs-hit loss for Q1, albeit one that was better than analysts had expected. Its revenues jumped and the online retail giant revealed first-time news of a revenue gain from its secretive cloud services division. Amazon shares jumped over 7% in after-hours trading.

Amazon reported a Q1 net loss of $57m/$0.12 per share, compared to a year-ago profit of $108m/$0.23 per share, as a heavy spend on its online infrastructure and other projects virtually cancelled out those sales gains. Operating margin for the quarter was 1.1% of worldwide sales, compared with 0.7% a year earlier and 2% in last year’s final quarter.

Sales for the opening quarter jumped 15% to $22.72bn, just ahead of analysts’ $22.39bn with a US rise offsetting a fall in international sales, hit in part by the strong dollar and weaker foreign currencies.

Sales of electronics and other merchandise in North America were still the company’s mainstay, up 31% in the year to $10.25bn, against up 4% internationally. But the results announcement was frustratingly short on information around its fashion offer.

What it did disclose for the first time since its creation in 2006 were the results of its cloud service division, Amazon Web Services (AWS), with revenues up 49% to $1.57bn. AWS operating income rose to $265m from $245m last year although it didn’t disclose AWS’s overall profitability.

Of the service that provides computing power to startups and other companies such as Netflix, Amazon founder and CEO Jeff Bezos said: “Amazon Web Services is a $5bn business and still growing fast – in fact it’s accelerating.

“Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence.”

For Q2, Amazon expects sales of $20.6bn-$22.8bn with analysts expecting $22.12bn.

It also reaffirmed it is investing for the future accompanied more possible losses. The company projected its operating results in Q2 would range between a loss of $500m and a gain of $50m.

• Amazon is to offer same-day delivery nationwide in the UK as early as next year after the delivery network it is signed up to launches a huge expansion. An initial trial of Connect Group’s ‘Pass My Parcel’ service, which is currently only being used by Amazon, has proved a success and is now being expanded from 700 pick-up locations to between 5,000 and 6,000 to provide nationwide coverage.

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