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Amazon Q2 CE Segment Sales Jump 36%

7/23/2003 08:57:00 AM Eastern

Seattle - North American consumers, responding to everyday discounts and free shipping, did much to hike sales in Amazon.com’s CE segment in the second quarter, with dollar volume soaring 36 percent to $177.4 million, up from $130.2 million in the year-ago period.

Consolidated sales of CE products, including international business, climbed 49 percent in the second three months, hitting $208.5 million, compared with $139.9 million in the second quarter a year earlier.

Second quarter sales in Amazon's media segment, which includes DVD/video and video games, increased 14 percent in North America in the second three months, ended June 30. This reached $499.1 million for the period, up from $439.2 million in the second quarter in 2002.

Consolidated media sales climbed 33 percent, to $865.1 million in the second quarter, compared with $648.2 million in the same quarter a year ago.

Amazon sales in North America overall rose 20 percent in the second quarter, reaching $702.5 million, up from $586.5 million year-on-year. Operating income in North America for the three months increased 53 percent, to $54.6 million, up from $35.7 million in the second quarter of 2002. Segment gross margin dropped 200 basis points, to 27 percent in the second quarter, compared with 29 percent in the year-ago period.

For the six months, CE segment sales in North America climbed 34 percent, to $345.6 million, up from $257.8 million in the same three months last year. Sales for all North American business rose 17 percent in the first half, reaching $1.4 billion, compared with $1.2 billion year over year.

Consolidated Amazon sales in the second quarter jumped 37 percent, hitting $1.1 billion, up from $805.6 million in the second quarter of 2002.

The online retailer narrowed its net loss for the second quarter, to $43.3 million, compared with a loss of $93.6 million in the same period a year ago. Second quarter pro forma net income, which includes interest expense, came in at $42.3 million, compared with a pro forma net loss of $4.4 million in the same period in 2002.

'In January, we shifted money from TV and print advertising to customers through lower prices and free shipping,' said Amazon.com founder/CEO Jeff Bezos. 'We're pleased with the results.' Chief financial officer Tom Szkutak added during a conference call that Amazon’s new everyday low price (ELP) proposition for categories including CE — along with greater selection and shopping convenience — are the cornerstones of its growth strategy.

For the six months, Amazon consolidated sales increased to $2.2 billion, up from $1.7 billion in the first half of 2002.

Net loss for the six months was reduced to $53.4 million, compared with a loss of $116.7 million in the year-ago period. Six-month pro forma net income hit $82.6 million, compared with a pro forma net loss of $9.3 million in the first half of last year.

International segment sales, a strong suit in Amazon's growth plans, grew 81 percent in the second quarter, to $397.4 million, up from $219.1 million year-on-year. This business benefited from $54 million in changes in foreign exchange rates, compared with the second quarter in 2002. Operating income for the international segment reached $12.6 million, compared with an operating loss of $9.7 million year over year.

Bolstered by the ongoing success of its online selling strategy, Amazon is raising guidance for the coming months. Third quarter consolidated net sales are expected to be between $1.08 billion and $1.15 billion, up 25 percent to 30 percent, compared with 2002. Consolidated segment operating income is expected to be between $55 million and $70 million.

For the 12 months, net sales should come in between $4.9 billion and $5.1 billion, or grow between 25 percent and 30 percent, said Amazon. Consolidated operating income is expected to be between $300 million and $340 million.