Amazon Marks 10th Birthday With Boost in Stock Price
Tim Ghriskey, chief investment officer at Solaris Asset Management, New York, said the earnings were a surprise since Amazon had experienced several rough quarters. But he said the company's recent initiatives are paying off.
"They are trying to capture market share so that future earnings are higher," he said. "I think it's the right strategy."
Amazon reported a 26 percent increase in net sales to $1.75 billion in the second quarter compared with $1.39 billion for the year-ago period. Net income was $52 million in the quarter, which beat analyst forecasts at Thomson Financial. Net income for last year's second quarter was $76 million.
Amazon attributed the sales increase to a rise in the amount of third-party sales on the site and the success of its Amazon Prime program, which lets customers get unlimited express two-day shipping on items for a flat annual fee of $79.
Third-party sales from companies like Macy's accounted for 28 percent of the company's total items sold, up from 24 percent last year, said Tom Szkutak, chief financial officer at Amazon.
The third-party program is one of several steps Amazon needed to make to help it ward off the threat from offline companies like Wal-Mart entering the online marketplace, Ghriskey said.
"It's certainly one of the business initiatives that solidifies their position in the marketplace," he said. "It's not what it was like seven years ago when you had all of these start-up companies. The [online] business has really solidified into a few mainstream companies."
Amazon Prime, which debuted in February, was highly touted in the earnings statement though the company has not disclosed exactly how the program has affected its financials.
"Amazon Prime members love getting unlimited two-day shipping for free with no minimum order size," founder/CEO Jeff Bezos said in a statement. "Though expensive for the company, Amazon Prime creates a premium experience for our customers who join, and as a result we hope they'll purchase more from us in the long term."
Ghriskey was not convinced it would work.
"I think they have high hopes, and it's smart that they play it up," he said. "It's a step they had to take, and hopefully they will find other initiatives."
Amazon marked 10 years in business July 16 and expressed confidence for the rest of the year. The company said it expects third-quarter net sales of $1.76 billion to $1.91 billion and sales for the year of $8.2 billion to $8.6 billion, a 20 percent to 25 percent increase.
A nice chunk of those sales are expected to come via a little bit of magic. Amazon said it received more than 1.5 million orders for "Harry Potter and the Half-Blood Prince" worldwide before the book's July 16 release. The pre-orders made the latest "Harry Potter" book the company's largest new product release.
In other news, Photoworks had a 1-for-5 reverse stock split and changed its ticker symbol to PHTW.