Amazon N.A. CE Segment Sales Rise 25%

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Seattle — First-quarter North American sales in the electronics and other general merchandise segment at Amazon.com increased 25 percent, hitting $282 million, up from $224 million in the year-ago three months.

The CE segment at Amazon helped the online retailer’s overall North American sales jump 21.1 percent in the first three months, ended March 31, reaching $1 billion, compared with $847 million in the first quarter of 2004. This business segment includes consumer electronics, camera and office products.

Amazon’s media segment, the company’s largest, enjoyed a 17 percent first-quarter rise in North America, moving to $699 million from $599 million year-on-year. Media includes DVD/video sales, DVD rental, software, video games and video game consoles, along with books and music.

Operating income for Amazon’s total North American business, however, decreased 13 percent in the first quarter, down to $66 million, from $76 million in the same period a year earlier.Operating margin of North American net sales slipped to 6.4 percent in the first quarter, compared with 8.9 percent in the same quarter last year.

Despite a 24 percent increase in consolidated first-quarter sales, Amazon reported a drop in net income due to higher costs from its discounted and free shipping programs, tax expenses and technology outlays.

Consolidated sales in the three months hit $1.9 billion, up from a year-ago $1.5 billion, but net income decreased 30 percent, down to $78 million, from $111 million in the first three months of last year.

Excluding a $30 million benefit from year-over-year changes in foreign exchange rates, net sales grew 22 percent in the first quarter, compared with the prior year.

Net income for the first quarter includes $56 million in income tax expense, compared with a $2 million income tax benefit in the first three months of 2004. The first quarter also includes a $26 million gain for accounting changes.

Amazon said its first-quarter shipping loss reached $55 million, due primarily to its first-ever membership program started last February — a $79 annual-fee-plan, called Amazon Prime.

However, Jeff Bezos, CEO/founder, said, “We’re seeing especially heavy use of Amazon Prime in electronics, tools, kitchen and health and personal care. Getting your items right away [unlimited and free express two-day shipping, with no minimum purchase on over 1 million eligible products] changes the way you use and think about Amazon.com.”

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