NEWS

Amazon reports nearly $2b profit

Published on: 2nd February 2018

The online retailer drew millions of new customers to its Prime service for the holiday season.

Amazon has posted its largest profit in the company’s history. The online retailer said net income more than doubled to $1.86b, or $3.75 per share in the fourth quarter ended 31st December. Its profit received a provisional $789m boost from the US Republican tax bill passed in December. On average, analysts  were expecting just $1.85 per share, according to Thomson Reuters I/B/E/S.

The period running from before the US Thanksgiving holiday through to New Year was Amazon’s biggest-ever by revenue. Sales rose 38% to $60.5b in the quarter, beating estimates.

The company’s fast delivery, like its two-hour Prime Now service, has helped win over holiday shoppers eager to avoid the crowds of big box retailers. Prime saw more than 4m sign-ups in one week alone last quarter, and revenue from subscription fees grew 49% to $3.2, Amazon said.

That figure is expected to rise this quarter in part because the company recently raised the fee for month-to-month Prime plans, affecting some 30% of subscribers, according to analysts at Cowen & Co. Some 60m, or close to half of all US households, are estimated to have Prime subscriptions.

Advertising and other revenue rose 62% to $1.74b.

Brian Olsavsky, Amazon’s chief financial officer, said on a call with analysts that advertising was “a key contributor” to the company’s growing profit margin. Sales of Alexa, the voice aide embedded in the company’s Echo speakers and Fire TV players, as well as some cars and house gadgets, were also a major factor in the profit boost.

Also on the up were exports from British sellers, which increased by a quarter last year. Amazon and its e-commerce rivals are often blamed for a drop in footfall to the British high street as online shopping rises, as well as squeezing out small businesses thanks to their size. But the company is trying to position itself as an ally of independent sellers by opening up international markets to small and medium businesses.

Six in ten UK-based businesses selling on Amazon Marketplace now export abroad, with half of all sales on Amazon’s global sites coming from smaller, independent businesses.

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