Amazon.com produces 2Q profit
Shares of Amazon.com surged past the $500 mark after the company reported a second quarter profit and revealed more details about a phenomenally successful Prime day promotion that fell in the third quarter.
Sales for the second quarter ended June 30, increased 20% to $23.2 billion and excluding a $1.4 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 27%. The big news during the quarter was that Amazon.com was profitable. Net income totaled $92 million, or 19 cents a share, compared with net loss of $126 million, or 27 cents a share in the second quarter the prior year. The company also highlighted the fact that its free cash flow increased to $4.37 billion for the trailing twelve months, compared with $1.04 billion for the trailing twelve months ended June 30, 2014.
The company’s growth was driven by a wide range of factors and innovations, which founder and CEO Jeff Bezos was not shy about touting.
“The teams at Amazon have been working hard for customers,” Bezos said. Then in an extremely long run on sentence he detailed some of the company’s second quarter and more recent accomplishments. “We unveiled Amazon Business, opened Amazon Mexico, launched Prime free same-day, rolled out our ninth Prime Now city, broke our Black Friday record with the first-ever Prime Day, received 11 Emmy nominations for Transparent, debuted six new kids pilots, brought Echo to general availability, introduced the Alexa Skills Kit and Alexa Voice Service, opened FBA Small and Light, continued to double down on our fastest growing geography — India, launched 350 significant AWS features and services so far this year (ahead of last year’s pace), introduced AWS Educate, and entered into agreements for new solar and wind farms — enough to exceed our 2016 goal of 40% renewable energy.”
The Prime membership program is key to the company’s popularity and it continues to expand. Amazon launched Prime free same-day delivery in 14 U.S. metro areas, serving more than 500 cities and towns in the second quarter. The service allows Prime members to choose from more than one million items and order as late as noon to receive their order on the same day. The service is promoted as free, but being a Prime member costs $99.
To bring more customers into the Prime fold, Amazon held its inaugural Prime Day promotion on July 15 after the quarter ended. As part of the promotion, non-Prime members were given access to the service and the result was more new members tried Prime worldwide than any single day in Amazon history, according to the company. In addition, customers purchased more units on Prime Day than Black Friday 2014 and sellers using Fulfillment by Amazon (FBA) experienced record-breaking unit sales.
Looking ahead to the third quarter, a period that will include the effects of Prime Day, the company envisions a wide range of sales possibilities. Sales could grow between 13% and 24% to range from $23.3 billion to $25.5 billion. The company’s operating income could range from a $480 million loss to a $70 million profit compared to a prior year operating loss of $544.