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Amazon CE Sales Jump 25%

10/28/2002 11:18:00 AM Eastern

Seattle - Lower prices played a major role in pushing up third quarter sales 25 percent in Electronics, Tools and Kitchen - the consumer electronics segment at Amazon.com.

Segment sales for the three months reached $128.5 million, up from $103.1 million in the year-ago period. However, Amazon's CE segment registered a pro forma operating loss of $24.1 million in the third quarter, ended Sept. 30, down 27 percent from the $33.1 million pro forma operating loss recorded in the same period last year. Segment unit growth reached 39 percent in the third quarter, while gross margin slid 300 basis points to 10 percent.

Amazon's CE segment is not expected to make money until the fourth quarter in 2003, at the earliest, according to CEO Jeff Bezos. And even this prediction was iffy, since Bezos emphasized everything would have to go right for the segment to hit this mark by the end of next year.

For the nine months, sales in Amazon's Electronics, Tools and Kitchen segment increased 16 percent, hitting $383.2 million for the period, up from $330.6 million in the year-ago nine months. The segment also reduced its pro forma operating loss by about half in the nine months, down to $63.3 million, compared with a loss of $120.3 million in the same period in 2001.

Free shipping did much to help Amazon's overall sales in the third quarter climb 33 percent, to $851.3 million, up from $639.3 million in the same three months last year.

The company also dramatically reduced its overall loss in the third quarter, down to $35 million, compared with a loss of $169.9 million in the same quarter a year ago. If a $37 restructuring charge is plugged in, and using Amazon's pro forma profit calculation for the third quarter, the company broke even.

For the nine months, consolidated sales increased about 25 percent, hitting $2.5 billion, compared with $2 billion in the same period last year. Consolidated net loss for the nine months dropped to $151.8 million, compared with $572.4 million in the same nine months in 2001. On a pro forma basis, net loss for the nine months was $8.9 million.

Looking to the fourth quarter, Amazon expects sales to rise between 19 percent and 28 percent, reaching between $1.3 billion and $1.4 billion. Fourth quarter pro forma operating profit is anticipated at between $70 million and $95 million.

For all of next year, 2003, Amazon expects revenue will rise 10 percent, a significant drop-off from the expected 22 percent overall revenue increase this year, over 2001. In 2003, the company said it expects its pro forma operating profit to be over $200 million, an increase of from 15 percent to 35 percent, compared to this year.

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