Amazon posts big gains for fifth straight quarter

By Sarah Halzack

The results offer evidence that Amazon's huge scale is seemingly starting to translate into a profitable business model. Photo / Getty Images
The results offer evidence that Amazon's huge scale is seemingly starting to translate into a profitable business model. Photo / Getty Images

Amazon.com reported a big profit for the three months ending in June, its fifth straight quarter of gains, a pattern that suggests the e-commerce giant is starting to see a more consistent payoff from its long-term strategy of pouring money into its online shopping fulfillment network while working to amass huge volumes of customers.

The Seattle-based company's revenue soared 31 per cent to $30.4 billion in the second quarter. Its profit leaped to $857 million, or $1.78 per share, up from $92m, or 19 cents per share. Investors sent the stock up more than 2 per cent in after-hours trading.

To be sure, a hefty share of its earnings - some $718m in operating income - came from its lucrative cloud computing division, not its more widely known shopping business. And yet the North America division, largely comprised of business on its e-commerce site, saw an operating income of $702m, about double what it recorded in the same quarter last year.

The results offer evidence that Amazon's huge scale is seemingly starting to translate into a profitable business model, even as its fulfillment costs continue to grow.

Not included in the second-quarter earnings haul were the sales the company rang up on Prime Day, the massive deals bonanza it held on July 12 for the tens of millions of members of its Prime subscription program. Orders that day jumped 60 per cent compared to a year prior, the company said, eclipsing those on any previous Black Friday or Cyber Monday.

Charlie O'Shea, lead retail analyst at Moody's, said the timing of that sale was important context for interpreting the strong results.

"This is particularly impressive as we believe there was likely delayed shopping/spending by Amazon's key Prime members in anticipation of the Prime Day deals, especially where purchases of discretionary items are concerned," O'Shea said in a research note.

Still, Amazon's fulfillment costs jumped nearly 35 per cent to $3.88b in the quarter, a number closely watched by many investors. These days, the company is experimenting with everything from an Uber-like network of on-demand delivery drivers to buying its own trucking fleet in pursuit of ways to improve deliveries.

In a call with investors Thursday evening, Chief Financial Officer Brian Olsavsky said the company experienced 28 per cent growth in units sold in quarter, adding that growth was even stronger for sales fulfilled by Amazon as opposed to those fulfilled by third-party sellers.

To deal with those capacity issues and be better prepared for the busy holiday season, the company plans to open 18 new fulfillment centers this quarter, a sharp jump from the six centers it opened in the same quarter last year.

This is particularly impressive as we believe there was likely delayed shopping/spending by Amazon's key Prime members in anticipation of the Prime Day deals, especially where purchases of discretionary items are concerned.

To scroll through a list of announcements Amazon made in the latest quarter is to be reminded how sprawling its business is becoming.

It added 50 new brands to the lineup of its Dash program, in which customers buy small, Internet-enabled buttons to place around their homes that allow them to order recurring items such as detergent or coffee with one press.

Amazon also recently introduced a thinner, lighter Kindle e-reader and said it was set to debut three new pilots of comedy programs on its Internet streaming service.

- Washington Post

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