Holiday performance propels Amazon to stellar quarter results (AMZN)

Amazonreportedits earnings for Q4 2017, revealing that its net sales climbed 38% year-over-year (YoY) to reach $60.5 billion. This is thebiggestjump Amazon has seen in a holiday quarter since 2009, when it grew 42% YoY.

Meanwhile, Amazon’s net sales through its online stores totaled nearly $35.4 billion, up 17% YoY, slightly improving on Q4 2016’s 16% YoY growth. These sales, in conjunction with the performance of Amazon Web Services (AWS), other segments, and a tax benefit, enabled Amazon to post a net income of $1.9 billion for the quarter, its highest ever, up from $749 million in Q4 2016.

Amazon’s ability to grow holiday sales, despite its already large base, made for an impressive performance. The fact that Amazon was able to accelerate its Q4 online store sales growth to 17% YoY, even though it had nearly $30 billion in sales in the corresponding quarter in 2016, shows Amazon’s strength, Josh Blechman, Director of Capital Markets at Exponential ETFs, told BI Intelligence. It can be difficult for companies to build their sales at a high clip if they already have a high volume of sales, but Amazon doesn't appear to be struggling to do so. Amazon was estimated to account for 39% of visits to top online retailers during the holiday season, giving it tremendous reach and making continued growth possible.

The e-commerce titan’s decelerating shipping costs are a major reason the holiday season was successful and led to an impressive quarter. Amazon’s shipping costs grew 31% YoY in Q4 2017 to nearly $7.4 billion, but this is slower growth than the company has seen in over a year; the company's shipping costs grew 35% YoY in Q4 2016. Slowing the shipping cost increase to 31% YoY makes it lower than its growth in net sales, which let Amazon capitalize on its holiday boom and turn in the quarter it did, Blechman said. The decelerating growth is likely due to Amazon's efforts to develop and expand Fulfillment by Amazon (FBA), and improve its logistics network overall.

While its international business is still returning a loss, Amazon’s overseas investments are looking to replicate this level of logistics strength. Amazon has been investing in its overseas business, and this quarter it returned an operating loss of $919 million because of it. But these investments are aimed at building out its international delivery capabilities in order to match its US operations, according to Blechman.

The success of this strategy remains to be seen, and there is no timeline for when Amazon’s international segment might take off, but if it can offer speedy and consistent delivery in foreign markets, it will be able to attract more customers. This, in turn, could help Amazon replicate the success it's found domestically on an international scale.

To receive stories like this one directly to your inbox every morning, sign up for the E-Commerce Briefing newsletter. Click here to learn more about how you can gain risk-free access today.

Holiday performance propels Amazon to stellar quarter results (AMZN)

JOIN OUR PULSE COMMUNITY!