Amazon.com Produces Tall Q3 Results
Online retailer Amazon.com experienced a
highly successful third quarter of 2009 (ended September 30, 2009), with significant increases in net sales and income and operating income. Selected highlights and analysis follow.
Net Sales Grow 28%
Consolidated net sales increased 28%, from $4.26 billion in Q3 2008 to $5.45 billion in Q3 2009. North American net sales grew 23.4%, from $2.3 billion to $2.85 billion, while international net sales grew 64%, from $1.96 billion to $2.6 billion.
Net Income Skyrockets
Consolidated net income showed impressive 68% growth, rising from $118 million in Q3 2008 to $199 million in Q3 2009.
Operating Income also Impresses
Consolidated operating income grew 62%, increasing from $154 million in Q3 2008 to $251 million in Q3 2009. North American operating income rose 77.2%, from $88 million to $156 million, while international operating income rose 35.6%, from $143 million to $194 million.
Gross Profit Goes Up
Consolidated gross profit went up 27.2, from $999 million in Q3 2008 to $1.27 billion in Q3 2009. North American gross profit rose 28.3%, from $586 million to $752 million, while international gross profit climbed 26.1%, from $413 million to $521 million.
Fourth Quarter Guidance
During Q4 2009, Amazon expects consolidated net sales between $8.12 and $9.12 billion, representing growth between 21 and 36% from Q4 2008. In addition, it expects operating income between $300 and $425 million, representing growth between 10 and 56% from Q4 2008.
Why was Amazon So Successful in Q3?
Amazon.com did not offer specific commentary in its financial release about why its quarterly financial results were so overwhelmingly positive. The retailer did say its
Kindle e-reader device, currently priced at $259 USD, has become its most popular item by unit sales and dollars across all product categories. In addition, items shipped on behalf of sellers who utilized the Fulfillment by Amazon (FBA) third-party logistics service more than tripled from the prior year, and Amazon expanded international free shipping offers during the quarter.
However, these factors alone do not likely account for Amazon’s third quarter growth. As the largest “pure play” online retailer with a vast product assortment that cuts across numerous categories, Amazon is likely benefiting from a general increase in online shopping. In March 2009, a study from comparison shopping company
PriceGrabber and market research firm
Market Reporter, U.S. consumers are reacting to the current economic crisis by doing more of their shopping online. The study also indicates online consumers are slowly becoming more willing to spend money.
More recently, the
Shop.org Quarterly Online Sales Update showed that in Q3 2009, 72% of online U.S. retailers experienced
increased sales. Multichannel retailers and branded manufacturers reported higher incidences of increased sales than online-only retailers, but larger retailers were more likely to report increased sales than medium- or small-sized retailers. In addition, according to figures from
Nielsen Online MegaView Retail, in August 2009 Amazon.com
ranked number eight in the top 10 retailers by conversion rate, with a 17% conversion rate.
And in the area of “imitation is the sincerest form of flattery,” Wal-Mart Wal-Mart introduced Wal-Mart Marketplace, a new program that expands its online product assortment to more than one million items. Walmart Marketplace enables a select group of retailers to offer additional products at Walmart.com, expanding Wal-Mart’s assortment in categories including home, baby, apparel, and sporting goods. This model is similar to the one Amazon previously used in concert with vertical retailers such as Toys R Us and now uses to allow
individual sellers to vend their goods on its website. If the world’s largest retailer is copying a portion of Amazon’s business model, clearly Amazon is doing something right.
