Amazon.com’s Q1 Profits Up 115%

by Alan Wolf -- TWICE, 4/25/2007

Seattle — A lower tax rate and strong U.S. sales helped propel Amazon.com’s net earnings 115 percent to $111 million for the first quarter, ended March 31.

Net sales for the three-month period increased 32 percent to $3 billion.

“We’re pleased with our overall strong growth,” said founder/CEO Jeff Bezos in a statement.

Boosting results was a $12 million reduction in taxes and an $84 million benefit from favorable fluctuations in foreign exchange rates. Bezos also credited the company’s Amazon Prime membership program for accelerating North American sales. The program provides free two-day express shipping on many items for a flat annual fee of $79.

Within Amazon’s North America segment, operating income grew 39 percent to $86 million, and net sales rose 30 percent to $1.6 billion for the quarter. Of that, sales of electronics and general merchandise rose 51 percent to $564 million, and sales of media increased 21 percent to $990 million.

Amazon defines electronics and general merchandise as all items not included in media, including electronics and office, camera and photo, toys and baby, tools, home and garden, apparel, shoes, sports and outdoors, kitchen and housewares, gourmet food, grocery, jewelry and watches, health and personal care and beauty. Media consists of DVD rentals and sales of books, music, DVD/video, magazine subscriptions, software, video games and video game consoles.

During the quarter, the e-tail pioneer launched Unbox on TiVo, which allows TiVo subscribers to download, store and watch on their TVs movies and television shows from Amazon’s Unbox video download service.

The e-tailer also expanded its fulfillment capacity during the quarter and throughout 2006 through “gains in efficiencies” and increases in leased warehouse space. The expansion was designed to accommodate greater selection and in-stock levels and to meet anticipated shipment volumes from sales of Amazon’s products and those of third parties for whom Amazon provides fulfillment, the company said.

Amazon spent $186 million on “technology and content” expenses during the period, which are comprised largely of payroll and related costs for employees involved in application development, category expansion, editorial content, buying, merchandising selection and systems support, and costs associated with its systems and telecommunications infrastructure. Over the past two years Amazon has invested about $1 billion in this area.