26/09/2020

Tech giant’s shares soar in after-hours trading despite high shipping costs

Amazon.com Inc.s
AMZN 0.68%
fourth-quarter sales blew past a previous record as robust holiday sales and profit from cloud and advertising businesses helped offset growing shipping costs for its one-day Prime program.The Seattle companys shares jumped more than 10% in after-hours trading, adding about $100 billion to the companys market value. Should the stock keep the gains Friday, Amazon would be the fourth U.S. company to finish with a market cap above $1 trillion.
Profit rose 8% to $3.3 billion during the all-important holiday quarter, after sliding more than 25% from July to September due to its costly one-day shipping effort for Prime members. The company beat its quarterly profit estimate of between $1.2 billion and $2.9 billion. Earnings per share were $6.47, compared with analyst estimates of $4.04 a share, according to a survey by FactSet.
Amazons fourth-quarter revenue rose 21% to $87.4 billion from a year earlier.
There was investor concern that one-day shipping would be a drag to margins, so the fact that they have been able to offer one-day shipping and also at the same time drive some efficiency has to please investors, Raymond James analyst
Aaron Kessler
said.
The companys shipping costs rose to $12.88 billion, a 43% increase from a year earlier. Amazons costs to build out one-day shipping capabilities have continued to surge as Amazon moves inventory closer to customers. One-day spending reached more than $800 million from April to June and was expected to nearly double in the fourth quarter to $1.5 billion.
Last month, Amazon said that it had its best holiday shopping season ever, with billions of orders received globally. The National Retail Federation reported that U.S. holiday sales grew by 4.1% in 2019, with online sales growing 15%.
Amazon said it has more than 150 million Prime members world-wide.
Members pay $119 a year to access free and fast shipping options, Amazons streaming service, discounts at Whole Foods Market and other benefits.
The last time Amazon disclosed the number of Prime members was in April 2018, when the company said it had more than 100 million members.
Amazons holiday results outperformed competitors, who reported weak results for the quarter.
Target Corp.
s holiday sales missed its forecasts partly due to a slump in sales in the toy and electronics categories.
Macys Inc.,J.C. Penney Co.,Kohls Corp.
and Victorias Secret parent L Brands Inc. all reported lower sales for November and December.
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In the quarter, Amazon spent a little less than the $1.5 billion it projected for the quarter to fuel its one-day Prime shipping program,
Brian Olsavsky,
Amazons chief financial officer, said during a call with media.
We are getting more efficient, he said.
The company expects an additional $1 billion in costs related to the program next quarter. As the company fulfills more one-day orders, it has added warehouse and delivery employees.
Amazons head count grew by 23% to 798,000 from a year earlier.
Amazon Web Services, the companys cloud-computing operation and its main profit center, continued to show signs of slowing growth.
The unit delivered $10 billion in sales, rising 34% from a year earlier. The division had historically grown by more than 40% each quarter.
Operating income for AWS rose 19% to $2.6 billion. During the quarter, Amazons cloud-computing business suffered a blow when the Pentagon chose competitor
Microsoft Corp.
as its vendor for a $10 billion government contract. Amazon is protesting the result.
By contrast, Microsoft posted record sales Wednesday buoyed by its cloud-computing business. The companys cloud-computing sales increased 62% in its fiscal second quarter from a year ago.
Amazons advertising business posted $4.8 billion in sales, a 41% increase from the year-earlier period. The unit, which sells advertising space in the form of sponsored products in search and display ads, has become another cash cow for the company.
Amazons international business posted another operating loss for the quarter, and profit declined 15.6% in its North American unit, which includes the bulk of its e-commerce operations.
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The physical stores segment, which includes Whole Foods, had $4.4 billion in sales for the period, down 1% from a year ago.
Amazon said it expects first-quarter sales of between $69 billion and $73 billion.
It projected its operating income to fall to between $3 billion and $4.2 billion, compared with $4.4 billion in first quarter 2019.
Were watching it very carefully, Mr. Olsavsky said in response to a question on whether the coronavirus outbreak in China would affect business operations. Amazon doesnt have direct operations in Wuhan, China, but a large number of its third-party sellers are from China.
—Sebastian Herrera contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com
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