Amazon Cooling Off As Electronics Gain

By Jeff Malester On Feb 12 2001 - 8:00am

SEATTLE -Fourth-quarter net-sales growth at Amazon.com reflects "exceptionally strong sales" in the company's Electronics, Kitchen and Tools & Hardware stores, with Electronics being its second largest U.S. store in the year, said the online retailer.

In the fourth quarter ended Dec. 31, more than 35 percent of U.S. customers purchased items from Amazon.com's Electronics, Kitchen, Tools & Hardware and Toys & Games stores, an increase of 47 percent over 1999.

The segment that includes U.S. Books, Music and DVD/Video recorded net sales of $511.7 million in the fourth quarter, about an 11 percent gain, compared with $459.9 million in the same three months last year. The segment was the only one at the company to register a gain during the quarter, hitting $39.1 million, compared with a $16.6 million loss in the year-ago three months.

For the year, the U.S. Books, Music and DVD/Video segment had net sales of $1.7 billion, about a 30 percent increase, compared with $1.3 billion in 1999. The segment was the only one to record a gain during the year, reaching $71.4 million, compared with a loss of $31 million for all of 1999.

As overall revenue slows at Amazon.com, the retailer is taking steps to cut costs. Faced with a cooling economy and diminishing consumer interest in online shopping, it said it would close two operations centers and lay off about 15 percent of its work force. The loss of 1,300 employees will result in a $150 million charge taken in first-half 2001.

Overall net sales for the fourth quarter were $972 million, a 44 percent jump over the $676 million reported in the fourth quarter last year. The company reported a net loss of $545.1 million in the fourth quarter, compared with $323.2 million in the year-ago period. On a pro forma basis, excluding non-cash charges such as the cost of options, the company said it lost $90.4 million in the fourth quarter, down from a loss of $184.9 million in the year-ago period.

Amazon.com expects sales for 2001 to be $3.4 billion to $3.5 billion, down from the $4 billion announced last October. Given this number, the company's full-year sales would increase 20-30 percent over 2000. The $2.8 billion in sales for all of 2000 was a 68 percent rise over the $1.6 billion reported in 1999.

In first-quarter 2001, Amazon.com said net sales are expected to grow to between $650 million and $700 million. Pro forma operating losses are expected to decrease year over year to between 10 percent and 13 percent of net sales. Gross margin is expected to be between 21 percent and 23 percent of net sales.

"Over the past year, our U.S. pro forma operating loss decreased from 24 percent of net sales in the fourth quarter of 1999 to less than 2 percent in the fourth quarter of 2000," said chief financial officer Warren Jenson. "While the strength of consumer spending remains uncertain, and there are no guarantees, we expect Amazon.com as a whole to reach operating profitability in the fourth quarter of this year."