Amazon beats estimates

October 24, 2000: 5:48 p.m. ET

Web retailer's third quarter loss is smaller-than-expected, sales rise 79%

NEW YORK (CNNfn) - The Web retailing giant Amazon.com reported a third-quarter loss Tuesday that was smaller than analysts had expected, as its sales rose a more-than-expected 79 percent.

For the third quarter ended Sept. 30 , Amazon (AMZN: Research, Estimates) reported a pro forma operating loss of $68 million, or 25 cents per share, compared to a pro forma operating loss of $79 million, or 26 cents per share, in the same period last year. The mean analyst estimate was for a loss of 33 cents per share, according to First Call, which tracks earnings estimates.

Amazon.com's U.S. Books, Music and DVD/Video segment pro forma operating profit was $25 million.

Revenue for the quarter rose 79 percent to $638 million from $356 million. Merrill Lynch analyst Henry Blodget had estimated that Amazon's third quarter revenue would be $600 million.

After losing 44 cents to $29.56 in regular trade, Amazon's stock rose $4.19 to $33.75 in after-hours trading in response to the results, which were released after the close.

Cumulative customer accounts increased by 2.8 million during the third quarter to more than 25 million as of Sept. 30. Merrill's Blodget had expected Amazon to acquire 2 million new customer accounts, fewer than the 2.5 million it gained in the second quarter and the 3.1 million added in the first quarter. Trailing 12-month sales per customer who purchased during the 12 months ended Sept. 30, was $130 up from $108 for the same period a year ago.

"This was a strong quarter for Amazon.com," said Warren Jenson, Amazon's chief financial officer, in a statement. "As we enter our sixth holiday season, we are better prepared opeationally than ever to deliver for customers, while at the same time we expect to improve our operating margin for the fourth consecutive quarter."

Gross margin as a percentage of revenue rose to 26.2 percent in the third quarter from 19.8 percent in the same period last year. That was better than the 23.5 percent gross margin some analysts had forecast.

For the first time, Amazon's Electronics store grew to become the second-largest U.S. store, behind Books and ahead of Music.

"The strong growth in electronics is due to great prices and deep

selection combined with our widely recognized customer service," said Amazon CEO Jeff Bezos in a statement. "In September, 6 of the 10 top-selling items on Amazon.com were from our electronics store."

Amazon gives forecasts for fourth quarter, 2001
In addition to reporting its third quarter results, Amazon gave forecasts for the fourth quarter and the next fiscal year.

The company said that its fourth quarter revenue is expected to be between $950 million and $1.05 billion. Analysts had forecast that fourth quarter revenue would be about $1 billion.

Amazon said that its gross margin in the fourth quarter is expected to be seasonally down compared to the third quarter of this year, although up strongly over the fourth quarter of 1999. Pro forma operating losses are expected to be between 5 percent and 8 percent of sales. Cash and marketable securities at year-end are expected to be more than $1 billion, the company said.

Looking forward to all of 2001, Amazon said that sales for the full year are expected to be about $4 billion. That's lower than the $4.27 billion forecast by Robertson Stephens analyst Lauren Cooks Levitan earlier this month and below a $4.64 billion estimate Merrill's Blodget made last June.

Pro forma loss from operations for 2001 is expected to narrow to less than 5 percent of sales, "perhaps substantially so," the company said. Cash and marketable securities as of March 31, 2001, are expected to be approximately $700 million, and the company expects to generate "significant" positive cash flow from operations for the nine months ended December 31, 2001.