Prime Power: Amazon’s sales surge ahead of holidays
Amazon.com’s third quarter sales increased 23% to $25.4 billion and the online retailer and tech giant posted a huge improvement in profitability.
The company said operating income increased to $406 million in the third quarter ended Sept. 30, compared to an operating loss of $544 million in third quarter 2014. Net income increased to $79 million, or 17 cents a share, compared with net loss of $437 million, or 95 cents a share, the prior year.
The company also said it expects fourth quarter sales to increase between 14% and 25%, to $33.5 billion to $36.7 billion, and not that the majority of units shipped would be to Prime members. The company also offered an extraordinarily wide range of guidance on profitability. Amazon.com said its fourth quarter operating income could range from $80 million to $1.28 billion compared to $591 million in the fourth quarter last year.
While the total sales growth number is impressive, coming on top of a large base, Amazon’s services business outstripped product sales. Of the $25.4 billion in total sales, product sales increased 15.2% to $18.5 billion, while service sales increase 55.3% to nearly $6.9 billion. North America showed strength, with sales growing 28.3% to $15 billion with the broad category Amazon.com calls “electronics and other general merchandise,” growing 34.6% to $11.8 billion.
Meanwhile, profitability improved as expenses grew at a slower rate than sales. Operating expenses for such things as product, fulfillment, marketing, technology and contend, increased 18.1% to $24.9 billion.
The stellar financial report caused the company’s shares to surge in after-market trading and again top the $600 mark.
The strength of Amazon’s sales growth is not a comforting thought for brick-and-mortar retailers heading into the holiday season. Just days earlier, Amazon.com announced plans to expand its Prime Free same- day delivery service to Chicago and Orlando, Florida, and new locations in the Greater New York, Northern New Jersey and Philadelphia areas. Other markets where the same day delivery is available include Atlanta, Baltimore, Boston, Dallas-Ft Worth, Indianapolis, the Greater Los Angeles area, Phoenix, San Diego, the San Francisco Bay area including Oakland and San Jose, Seattle-Tacoma, the Tampa Bay area and Washington, D.C.
The service, which does require an annual $99 Prime membership fee, promises that orders for an assortment of more than one million items placed before noon with be delivered the same day as long as the order size is above $35.