Amazon.com product sales slow, but not services

Amazon.com’s sales growth in the first quarter continued to outpace the overall e-commerce growth rate, especially Web services, but expenses related to interest and currency exchange caused the online leader to report a $57 million net loss.

Total sales for the quarter ended March 31 increased 15% to $22.72 billion but a strengthening of the U.S. Dollar caused a $1.3 billion currency exchange headwind. On a constant currency basis, which is how global retailers like to analyze their business, sales increased 22%.

The sales growth consisted of an 8.8% increase in product sales to $17 billion while Amazon Web Services sales increased nearly 40% to $5.6 billion. As result, Amazon’s cost of goods sold grew at a much slower pace and more than offset faster expense growth rates in areas such as fulfillment, technology and content. Consequently, operating profits increased 74% to $255 million from $146 million in the first quarter of 2014. Nevertheless, a surge in interest and foreign currency translation expenses caused the company to report a net loss of $57 million, or 12 cents a share, compared to a net profit of $108 million, or 23 cents a share, in the first quarter the prior year.

Amazon.com investors often look past the company’s reported net loss figures to focus on other growth related metrics. One of those is operating cash flow which increased 47% to $7.8 billion for the trailing twelve months, compared with $5.4 billion for the trailing twelve months ended March 31, 2014. Free cash flow increased to $3.2 billion for the trailing twelve months, compared with $1.5 billion for the trailing twelve months ended March 31, 2014.

In a statement that accompanied the first quarter results, founder and CEO Jeff Bezos made no mention of the company’s financial performance aside from a reference to the Amazon Web Services division known as AWS.

“AWS is a good example of how we approach ideas and risk-taking at Amazon,” Bezos said. “We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence. We manage by two seemingly contradictory traits: impatience to deliver faster and a willingness to think long term. We are so grateful to our AWS customers and remain dedicated to inventing on their behalf.”