Amazon's loss narrows

April 24, 2001: 6:04 p.m. ET

Online retailing leader posts narrower-than-expected loss

NEW YORK (CNNfn) - Amazon.com on Tuesday reported a first-quarter operating loss that was slightly less than what it told Wall Street to expect earlier this month on stronger-than-expected sales.

The leading Internet retailer said it lost $49 million, or 21 cents per share, excluding extraordinary charges. That compares with an operating loss of 35 cents per share during the same quarter a year ago, and is a penny less than the 22 cents-per-share loss Amazon executives told the Street to expect when they pre-announced the quarterly results on April 9.

At $700 million, Amazon's first-quarter revenue rose 21.9 percent from $573.9 million during the same period last year, and also was more than the $695 million executives had told analysts the company would report.

Prior to Amazon's pre-announcement, the Street had expected the company's loss to be nearer 30 cents per share on about $669.6 million in sales.

Amazon's gross margin during the first quarter, the percentage of sales remaining after subtracting product costs, was 26 percent, compared with 22.3 percent during the same quarter last year.

Shares of Amazon (AMZN: Research, Estimates) fell 52 cents to $15.68 on Nasdaq ahead of the earnings news, which was released after the closing bell. They rose 32 cents to $16 in extended-hours trade.

The company's stock, which was one of the highest fliers prior to the dot.com meltdown, has fallen more than 77 percent this year from a high of $68.62 last May. That decline has come amid mounting concerns about its cash position as well as rising skepticism among investors about its prospects for profitability.

Although it is the largest online retailer, the company has never shown a profit. Jeff Bezos, Amazon's chief executive, told CNNfn in January that he expects Amazon to post an operating profit by the end of this year.

During a teleconference with reporters Tuesday afternoon, Warren Jenson, Amazon's chief financial officer, said the company remains comfortable with that projection.

"We're right on track," he said. "I would encourage everyone to study the metrics which are included in our release. I think the pace of our progress and the positive slope of the trends are very evident."

As a means toward a profitable end of the year, Amazon has implemented a range of cost-cutting measures, including a 15 percent reduction of its work force and consolidation of its distribution and customer-service network.

When it pre-announced the first-quarter results, Amazon said it expects to record a $150 million charge against earnings in connection with the restructuring and post a net loss below $255 million.

Amazon said Tuesday it took a charge of $114 million during the quarter, and expects to take additional restructuring and other charges of over $50 million during the second quarter.

Jenson said there currently are no plans for additional layoffs.

"We announced the restructuring during our fourth-quarter conference call and executed that restructuring during the first quarter," he said. "We like where we are, and we're right on track with respect to our goal of profitability at year-end."

The company's net loss for the quarter was $234 million, or 66 cents per share. That compares with a net loss of $308.4 million, or 90 cents per share, during the same period a year earlier.

Amazon ended the quarter with $643 million in cash and marketable securities. Jenson said the company expects to finish the year with about $900 million in cash and marketable securities, and he brushed aside recent concerns about the company's cash position and liquidity.

Perhaps one of the most critical of Amazon's balance sheet has been Lehman Brothers' credit analyst Ravi Suria, who has warned twice in recent months that the company could face a "creditor squeeze" in the second half of this year because its liabilities are growing much faster than its assets.



	We are on plan. We did exactly what we said we would do.



	Warren Jenson Chief Financial Officer Amazon.com

Amazon's working capital in the first-quarter declined to $251 million from $386 million, while its accounts payable totaled $257.4 million, representing about 45 days on inventory.

Merrill Lynch analyst Henry Blodget said earlier in the day that he was expecting accounts payable nearer $308. "Accounts payable are important because we need to know whether the company achieved its cash target by stretching payables, or whether it is getting "squeezed" by its vendors — something that some analysts have argued would happen," Blodget said.

Even so, Jenson repeatedly said that Amazon is comfortable with its cash position and liquidity. "We are on plan," he said. "We did exactly what we said we would do."

Looking ahead, Jenson said Amazon expects sales in the second quarter to range between $650 million and $700 million, while its operating loss should be about even with the 21 cents per share just reported for the first quarter.

The most recent consensus estimate of analysts polled by earnings tracker First Call was for the company to post second-quarter sales of $683.6 million and an operating loss of 25 cents per share.

For the full year, Jenson said Amazon is aiming for sales to rise between 20 percent and 30 percent from the $2.8 billion it reported in 2000, and anticipates an operating loss ranging between 3 percent and 6 percent of sales. Analysts most recently had expected the company to post a 21 percent rise in sales and an operating loss of 78 cents per share for the year, according to the First Call survey.