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Amazon CE Segment Sales Increase

Seattle — Second-quarter North American sales in the electronics and other general merchandise segment at Amazon jumped 23 percent, climbing to $278 million, up from a year-ago $226 million.

The segment includes consumer electronics, office and camera sales.

The online retailer reported second-quarter North American sales for its largest segment, media, grew 17 percent in the period ended June 30, rising to $632 million, from $541 million the previous year. Media includes DVD rental and retail sales of DVD/video, software, video games and video game consoles.

Net sales growth across North America in the second quarter, which accounted for 55 percent of Amazon’s total sales mix in the three months, increased 21 percent, hitting $960 million, up from the prior year’s $791 million. Operating income in North America in the second quarter rose 9 percent to $72 million, from $66 million in the same period last year. Gross margin climbed to 29 percent, from 27.7 percent.

Consolidated second-quarter Amazon sales jumped 26 percent, hitting $1.8 billion, up from $1.4 billion in the same quarter last year.

Operating income moved up 21 percent, reaching $104 million, compared with $86 million year-on-year. However, higher tax expenses, in part, drove down second quarter net income to $52 million from a year-ago $76 million. Amazon took a $56 million income tax jolt in the three months.

Amazon continues to drive up costs with its discount shipping program, but, at the same time, the shipping benefits to consumers push up sales. Net shipping costs increased 31 percent in the second quarter, to $45 million, due primarily to costs of free shipping and the retailer’s Prime program.

“Amazon Prime members love getting unlimited two-day shipping for free with no minimum order size,” said Jeff Bezos, founder/CEO. “Though expensive for the company, Amazon Prime creates a premium experience for customers who join.” The Prime membership program, introduced last February, costs consumers $79 per year, and Amazon said this benefit particularly has helped to boost CE segment sales.

For the six months, Amazon’ CE segment sales rose 24 percent to $559 million, from $450 million, while sales in North America overall rose 21 percent to $2 billion from a year-ago $1.6 billion. North American operating income for the six months slipped 3 percent to $137 million, from $142 million in 2004.

Consolidated six month sales increased 25 percent, hitting $3.7 billion, up from $2.9 billion from the first half of last year. Net income for the six months dropped to $130 million from a year-earlier $188 million.