Despite reporting a net loss of $323 million (US$) or 96 cents a share for the quarter ended December 31, 1999, e-tail giant Amazon.com has seen its stock shoot up $9-3/16 in mid-day trading Thursday to a price of $78-5/8.
The stock price was buoyed by news that the company’s quarterly revenues tripled to $676 million from $253 million a year earlier, and that its North American book operations — which represent about half the firm’s revenues — showed a profit for the first time in its five year history.
Getting the Message
Trading in Amazon’s stock amounts to taking a roller-coaster ride. In April 1999, the stock was in the $100 range, but dropped to a low of $41 per share in August. By mid-December, the stock was back in the $100 range, but then dropped to the $60 to $70 range until its jump today.
Wall Street’s positive reaction came because Amazon executives seem to be getting the message that investors expect the company to start focusing on profitability.
CEO Jeff Bezos said that Amazon considers “driving toward profitability in each and every business” as one of Amazon’s key priorities, which also includes drawing more customers, expanding products and services, expanding to other countries and striking more partnerships.
“Improvements in the year 2000 will not only be visible in terms of new products and services, but should also likely be visible financially as well,” Bezos said.
More Than Words
While concerns about Amazon’s profitability caused many investors to look toward Wednesday’s announcement with a sense of apprehension, the company assuaged fears by hitting all the right notes and backing them up with strong prospects for profitability.
The key statistics were that Amazon’s North American book business operated in the black for the holiday season and that repeat customer orders represented more than 73 percent of its business during the quarter.
While repeat business was obviously important, the company also reported that new customers increased by 3.8 million, bringing its total customer base to 16.9 million at the end of 1999.
“We expect further improvement in gross margin during 2000,” CFO Warren Jensen said. “And we expect that in 2000, our overall operating loss will decrease significantly as a percentage of sales.”
Amazon also broke down sales by its key categories. Sales of books were up 66 percent to $317 million from a year earlier. Amazon also booked toy sales of $95 million, which was close to eToys’ reported holiday sales of $107 million.
In addition, sales of CDs were up 136 percent from the previous year to $78 million, while DVD sales jumped 500 percent to $64 million.
For the Year
For the fiscal year ended December 31, 1999, Amazon reported revenues of $1.64 billion versus $610 million in 1999. Its net loss increased to $719 million, or $2.20 per share, in 1999 from $124 million, or $0.42, in 1998.
Amazon apparently caused considerable confusion about its financials by highlighting what it called its “pro forma” loss in its press release, instead of its complete loss.
The pro forma loss was from operations only and excluded amortization of goodwill and other intangibles, stock-based compensation costs and merger, acquisition and investment-related costs.
Amazon utilized the same technique for reporting its quarterly results. While its net loss was $323 million, it highlighted its “pro forma” loss of $175 million in its press release.