Sat, Feb 03, 2018 - Page 10 News List

Amazon reports its largest profit ever

SHOPPING HELPER:Millions of customers ordered goods through Alexa, the online retail giant’s voice assistant embedded in its Echo speakers and Fire TV media players

Reuters Inc on Thursday reported profit of nearly US$2 billion, the largest in its history, as the online retailer drew millions of new customers to its Prime fast shipping club for the holiday season and as changes to US tax law added to its bottom line.

Amazon said that price cuts at Whole Foods Market Inc, which it acquired for US$13.7 billion last year, have been helping it win grocery sales as well.

The world’s largest online retailer said net income more than doubled to US$1.86 billion, or US$3.75 per share in the fourth quarter ended Dec. 31 last year.

Its profit received a provisional US$789 million boost from the US Republican tax bill passed in December last year.

Analysts on average were expecting just US$1.85 per share, Thomson Reuters I/B/E/S said.

As expected, the period running from before Thanksgiving holiday through New Year’s Eve was Amazon’s biggest-ever by revenue. Sales rose 38 percent to US$60.5 billion in the quarter, beating estimates.

The company’s fast delivery, like its two-hour Prime Now service, has helped win over holiday shoppers eager to avoid the crowds of big box retailers.

Prime saw more than 4 million sign-ups in one week alone last quarter, and revenue from subscription fees grew 49 percent to US$3.2 billion, Amazon said.

That figure is expected to rise this quarter, in part because the company recently raised the fee for monthly Prime plans, affecting about 30 percent of subscribers, Cowen & Co analysts said.

About 60 million, or close to half of all US households, are estimated to have Prime subscriptions.

Advertising and other revenue rose 62 percent to US$1.74 billion.

Amazon chief financial officer Brian Olsavsky said on a call with analysts that advertising was “a key contributor” to the company’s growing profit margin.

Perhaps the surprise star of the past quarter was Amazon’s voice assistant, Alexa, which is embedded in the company’s Echo speakers and Fire TV media players, as well as some cars and house gadgets.

Millions of Amazon customers ordered goods by voice with Alexa in the past year, Olsavsky said on a separate call with reporters.

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” Amazon founder and CEO Jeff Bezos said in a statement. “We don’t see positive surprises of this magnitude very often — expect us to double down.”

Amazon said it expects operating profit in the current quarter of between US$300 million and US$1 billion.

Analysts were expecting US$1.5 billion, analytics firm FactSet Research Systems Inc said.

“We’re still in heavy investment mode,” Olsavsky told reporters.

The company has become notorious for running on a low profit margin. Yet, its big bets on new services and entry into new industries have reaped shareholders rewards over the past decade, including Bezos, now the richest man in the world.

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