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Amazon posts 4Q loss
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February 2, 2000: 8:33 p.m. ET
Online retailer reports $185 million fourth-quarter loss, but stock soars on vow to focus on profits
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NEW YORK (CNNfn) - Amazon.com posted a larger-than expected fourth-quarter loss Wednesday, but its stock price rose sharply in late trading after company executives vowed to pay more attention to profitability this year.
The Seattle-based company, considered a bellwether of electronic commerce, reported a loss of $185 million, or 55 cents a share, before one-time items. Analysts polled by earnings tracker First Call had expected Amazon to post an operating loss of 48 cents per share. In the year-ago quarter, Amazon posted a loss of $22 million, or 7 cents per share. Revenue during the quarter soared 167 percent to $676 million.
"This was our fastest sequential growth as a public company, and we are grateful that so many customers chose Amazon.com for such a broad range of products," Jeff Bezos, Amazon.com founder and chief executive officer said in a statement.
In a conference call with analysts and reporters Bezos said "driving toward profitability in each and every business" is a key goal for the current year, a marked departure from previous quarters when Bezos refused to talk about profitability.
"Improvements in the year 2000 will not only be visible in terms of new products and services but should also likely be visible financially as well," Bezos said.
 Investors liked what they heard, sending Amazon's stock up 6-5/8 to 76-1/16 in after-hours trading. In addition, Warren Jenson, Amazon's chief financial officer, gave a bullish outlook for all of Amazon's business this year.
"We expect strong year-over-year sales growth in the first quarter, and our outlook for growth in 2000 remains strong," Jenson said. "We expect that in 2000, our overall operating loss will decrease significantly as a percentage of sales."
Amazon sees less red ink going forward
Amazon's operating loss in its U.S. retail businesses amounted to 20 percent of sales in the fourth quarter. Jenson said he expects that number to decline to "perhaps the single digits by the fourth quarter" of 2000.
"The quarter was no surprise, but the future guidance was very favorable," said Tom Courtney, an analyst at Bank of America Montgomery. "The forecast of single-digit losses is a sea change for Amazon. We believe this is a key inflection point for the stock and that it will take off from here."
Courtney also said he was pleased by Amazon's performance in key metrics such as customer additions, cost of acquiring customers, repeat purchase rates, and revenue per customer. "Revenue per customer rose, which is a big reversal from previous quarters," he said.
"Their tone was that they plan to focus on profitability and take their business international," said Paul Cook, a portfolio manager at Munder Capital Management.
Over its four-year history, Amazon has pursued a strategy of spending heavily on sales and marketing to build market share rather than attempting to earn a profit. Recent declines in the company's stock price indicate, however, that some investors and analysts are becoming impatient with Amazon's string of losses, which have totaled more than $464 million over the past two years.
In a sign that Amazon is taking a closer look at its cost structure, the retailer said at the end of last month that it had cut 150 people, or about 2 percent of its total work force of 7,500.
Amazon had to make about $39 million of inventory-related charges and write-downs in the fourth quarter because it overstocked its warehouses with items from its new business lines, such as toys and electronics. Over the past 18 months Amazon has diversified beyond books to a wide range of consumer products. U.S. books accounted for less than half the company's sales in the fourth quarter.
"This was our fastest sequential growth as a public company, and we are grateful that so many customers chose Amazon.com for such a broad range of products."
-- Amazon founder Jeff Bezos
The inventory-related charges were the major force driving Amazon's gross margins down to 13 percent of sales in the fourth quarter from 19.8 percent in the previous quarter. Jenson said that gross margin is expected to bounce back to around 20 percent of sales in the first quarter of this year, with further expansion throughout the year.
Amazon had warned investors of a wider-than-expected fourth quarter loss in early January. For all of 1999, Amazon posted a loss of $390 million, or $1.19 per share, before one-time items, on revenue of $1.64 billion. That compares to a net loss of $74 million, or 25 cents per share, on revenue of $610 million in 1998.
Amazon.com began the holiday shopping season on Nov. 10, with the launch of its home improvement, software, video games, and gift stores. Amazon said that over the following seven weeks, more than 2.5 million new customers shopped at the site for the first time and the company shipped about 20 million items. The company experienced peak shipping of approximately $16 million in one day, more than total company sales in 1996.
Amazon said that its customer accounts increased by 3.8 million during the fourth quarter to more than 16.9 million at the end of last year, an increase of more than 170 percent from 6.2 million customer accounts at the end of 1998. Repeat customer orders represented more than 73 percent of orders in the fourth quarter, up from 72 percent in the previous quarter 
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