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Amazon beats the Street
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April 26, 2000: 7:42 p.m. ET
Online retailer sneaks past estimates; sees narrower operating losses
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Online retailer Amazon.com posted a first-quarter loss that was slightly narrower than Wall Street had expected on revenue that was up sharply from the same period last year.
The Seattle-based company, considered a bellwether of business-to-consumer electronic commerce, reported an operating loss of $122 million, or 35 cents per share, before one-time items.
Analysts polled by earnings tracker First Call had expected Amazon (AMZN: Research, Estimates) to post an operating loss of 36 cents per share during the quarter.
Including aqcuisition-related and other special charges, Amazon's net loss for the quarter was $308.4 million, or 90 cents per share, compared with $61.7 million, or 20 cents per share during the same period last year.
Amazon's first-quarter revenue was $574 million. That's up 95 percent from last year's first-quarter revenue of $294 million, but down 15 percent from the $676 million in the fourth quarter, marking the first time the company has posted a sequential revenue decline since its inception.
 Analysts, however, had expected the sequential sales slip due to several highly seasonal business lines such as toys and electronics, which the company recently added to its fold.
Amazon, which emerged in 1995 as an online bookseller, has diversified well beyond books to a wide range of consumer products.
The company, which now reports music and DVD/video revenue with its book revenue, achieved profitability with that business line during the fourth quarter, and expects it continue to operate profitably for the remainder of the year.
"We expect our U.S. Books, Music and DVD/Video segment to be profitable on a pro forma operating basis for the full year 2000," Warren Jenson, Amazon's chief financial officer, told analysts in a conference call Wednesday evening.
At $401 million, sales in that segment were up 50 percent from the corresponding period last year, Jenson said.
Jenson also told analysts that the company expects to be achieve a positive operating cash-flow over the next three quarters, "enough, we expect, to more than cover our planned capital expenditures," he said.
"That's important because it's another element in their progress toward profitability," noted Greg Konezny, an analyst at U.S. Bancorp Piper Jaffray.
Though not expecting to see any black ink on its bottom line, Amazon executives said the company's operating losses as a percentage of sales will continue to decrease throughout the remainder of the year, perhaps reaching the single digits by the fourth quarter.
Those comments more or less mirrored what they said when the company posted fourth-quarter results, according to Konezny. "All in all, it was an upbeat call, but nothing really earth-shattering or new and exciting came out of it," he said. "It was mostly the same themes we heard in the fourth quarter."
Analysts polled by First Call expect Amazon to post a loss of $1.22 per share for the year, and most don't see the company turning a profit until 2002.
The company's losses have stem largely from investments and spending to boost its offerings and build a loyal base of customers. During the first quarter, Amazon said it added 3.1 million new customer accounts, bringing the total up to 20 million as of March 31.
Executives also said repeat-customer orders represented 76 percent of orders during the quarter, up from 66 percent during the same period last year.
 Ahead of the earnings release, Amazon shares added 1-1/16, finishing 2 percent higher at 53-1/2.
The stock fell to 52 in after-hours trade, but Piper Jaffray's Konezny said he does not expect it to move sharply in either direction when it resumes Nasdaq trade Thursday.
"I don't expect to see any real substantial changes in terms of how the Street is looking at the progress and the development of Amazon's business model," he said. "Aside from broader market moves, I don't expect the stock to do a whole lot."
Like most dot.coms, Amazon shares have taken a wild ride during the recent market correction.
But Jeff Bezos, Amazon.com founder and chief executive officer, characterized the shakeout as beneficial to his company and its shareholders.
 "As the era of Internet sector investing comes to a close, it appears that investors are becoming more discerning about companies on an individual level, something we believe will result in a positive impact on the competitive landscape," Bezos said.
"We believe what's happening in the market today is an important development for Amazon.com's shareholders, creating an environment where more rational behavior by investors and by online retailers, combined with our current platform and strong balance sheet should serve to further strengthen our position," Bezos added.
Piper Jaffray's Konezny agreed, saying that as e-commerce startups begin to fall by the wayside, Amazon stands a good chance of snatching up the customers they leave behind.
"When e-commerce was in its early stages, you had lots of start-up companies scrambling for customers and spending inappropriate amounts to acquire those customers," he said. "A lot of those businesses won't survive, and where do their customers go? More likely than not, Amazon has a good shot at getting them, and that helps support the long-term viability of Amazon and its path toward profitability." 
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