Amazon.com has reported a 42% rise in Q4 revenues.
eRetailer Amazon.com last night reported its revenues for the final quarter of 2000 were over $960 million, which is a 42% rise over the same quarter last year. Gross profit rose by 140% to $210 million. The company had been predicted to earn revenues of over $1 billion and make $230 million in gross profit, but nonetheless investors were pleased by the results. Amazon’s share price rose by 5% at the start of trading today.
Operating losses are down from 26% of sales to just 7%, at around $70 million for the quarter. Meanwhile, it has $1.1 billion left in cash reserves, which should easily see it through to breakeven.
The figures are particularly impressive given the dismal holiday season most other retailers, both traditional and online, have seen in the US. Major traditional retailers including Wal-Mart have already downgraded their profit expectations for Q4. eRetailers such as eToys, which desperately needed a good holiday season, have missed sales targets by as much as 50%. Indeed, few expect eToys to exist in its present form by next December.
The company’s plans to move away from the low-margin books and music market to become an online department store also seem to be going well. 35% of customers bought products other than books, music and videos. Diversifying is an excellent move, since Amazon’s key strength is its brand. Most people trust the company and Amazon can leverage this in more lucrative B2C markets.
Things should now get easier for the firm. It is now wisely choosing to diversify through partnership deals that allow it to stay away from fulfillment issues, as shown by its photo equipment deal with Ofoto. This will allow it to grow revenues with little outlay on the back of its brand and existing customer base, whilst its core markets will also grow as the number of people willing to shop online increases. It is also forming partnerships with bricks and mortar giants such as Toys R Us that allow it to dominate B2C eCommerce for categories such as toys.
Competition from bricks and clicks retailers like Wal-Mart means Amazon is unlikely ever to reach the dizzy profit predictions made 18 months ago. However, it looks likely to become the major B2C pureplay survivor. Shareholders can stop holding their breath.
