Amazon (Nasdaq: AMZN) reported fourth-quarter revenue of $972 million, up 44% from last year. The pro forma operating loss was $60 million, or 6% of sales, compared to a 26% of sales loss in the last quarter of 1999. Excluding onetime events, the company lost $0.25 per share, in line with expectations.
Including equity investments and amortization of goodwill, Amazon lost $545 million in the fourth quarter, or $1.55 per share, en route to losing $1.5 billion including all charges, or $4.02 per share, in 2000.
Overall, the results are a mixed bag for Amazon -- some good, some bad. Operationally, the company improved margins over 1999. Gross margin totaled 23.7% for all of 2000, versus only 17.7% in 1999. The fourth quarter saw marked improvement in gross margin, from 12.9% in 1999 to 23.1% in 2000. However, operating expenses rose 69.5%, to $1.5 billion this year, while sales in turn rose 68.4%, to $2.7 billion.
Operating expenses include $110 million in additional amortization costs this year, and $192 million in "impairment-related and other expenses" that didn't exist last year. This brought total operating expenses to $1.5 billion, or 55% of sales, compared to $896 million in 1999, or 54% of sales.
Back to the good side: Inventory is down 21% from last year to $170 million. This demonstrates significant inventory management improvement. Finally, fulfillment costs were in the low teens as a percent of sales in the fourth quarter, moving favorably downward.
Expectations for 2001
Management estimates that revenue will rise 20% to 30% in 2001. This means that sales for the year could be about $3.3 billion to $3.6 billion, below the $4 billion in sales that was generally hoped for by investors. First quarter sales are expected to be relatively low, at about $675 million, due to a seasonal decline.
Amazon ended 2000 with over $900 million in cash and securities, as it predicted, and it should end the first quarter with more than $650 million. It expects to end 2001 with more than $900 million, so Amazon needn't raise more funds unless it wants to.
Management expects to report a pro forma operating profit in the fourth quarter of this year. Pro forma operating losses are expected to be 4% to 6% of sales for the year in entirety.
During the conference call, Amazon stated that capital spending should decline in 2001 to around $120 million, from above $200 million in costs last year -- partly because the company doesn't expect to add any distribution facilities in 2001.
Now what?
Amazon is lowering costs by cutting 1,300 jobs, or 15% of the staff. Further, its Seattle distribution center will operate on a seasonal basis, and it is closing one of its customer service centers.
In other words, Amazon continues to tighten its belt. Retail sales are a challenging, seasonal business -- even online. Amazon will spend the first three quarters of this year still losing money, and for the fourth quarter management is only predicting operating profitability based on pro forma figures.
Investors should realize that this doesn't necessarily mean that Amazon will also produce a net profit, nor is management even suggesting that. If Amazon achieves a modest operating profit in the fourth quarter, it will still have interest expenses to pay on its $2.1 billion in long-term debt (about $36 million in expenses per quarter), and that, alongside other potential costs, would likely keep Amazon from having a net profit (unless it produces investment gains).
Amazon is on the right path financially, but whereas in the past this was a "moonshot" business and nobody knew how far it could go, or how large it might become, the limitations are now showing through like threads in a well-worn shirt -- those limitations include 20% to 30% sales growth this year, and seasonal sales perhaps perpetually. Those limitations also indicate modest profitability levels, at least for the next several years.
The name that Amazon has created for itself among shoppers is very commendable, but for investors, Amazon's stock embodies the many challenges of the business.
Mittlwerweile wird AMZN langsam aber sicher interessant.
Amazon versucht noch in diesem Jahr profitabel zu werden. Frage ist, ob
es klappen wird. Nach langer Ueberlegung werde ich AMZN erstmalig in mein
Depot aufnehmen. Einen Kaufpreis zwischen $14-15 ist noch interessant und
koennte am Ende des Jahres der Renner in meinem Depot werden.
Including equity investments and amortization of goodwill, Amazon lost $545 million in the fourth quarter, or $1.55 per share, en route to losing $1.5 billion including all charges, or $4.02 per share, in 2000.
Overall, the results are a mixed bag for Amazon -- some good, some bad. Operationally, the company improved margins over 1999. Gross margin totaled 23.7% for all of 2000, versus only 17.7% in 1999. The fourth quarter saw marked improvement in gross margin, from 12.9% in 1999 to 23.1% in 2000. However, operating expenses rose 69.5%, to $1.5 billion this year, while sales in turn rose 68.4%, to $2.7 billion.
Operating expenses include $110 million in additional amortization costs this year, and $192 million in "impairment-related and other expenses" that didn't exist last year. This brought total operating expenses to $1.5 billion, or 55% of sales, compared to $896 million in 1999, or 54% of sales.
Back to the good side: Inventory is down 21% from last year to $170 million. This demonstrates significant inventory management improvement. Finally, fulfillment costs were in the low teens as a percent of sales in the fourth quarter, moving favorably downward.
Expectations for 2001
Management estimates that revenue will rise 20% to 30% in 2001. This means that sales for the year could be about $3.3 billion to $3.6 billion, below the $4 billion in sales that was generally hoped for by investors. First quarter sales are expected to be relatively low, at about $675 million, due to a seasonal decline.
Amazon ended 2000 with over $900 million in cash and securities, as it predicted, and it should end the first quarter with more than $650 million. It expects to end 2001 with more than $900 million, so Amazon needn't raise more funds unless it wants to.
Management expects to report a pro forma operating profit in the fourth quarter of this year. Pro forma operating losses are expected to be 4% to 6% of sales for the year in entirety.
During the conference call, Amazon stated that capital spending should decline in 2001 to around $120 million, from above $200 million in costs last year -- partly because the company doesn't expect to add any distribution facilities in 2001.
Now what?
Amazon is lowering costs by cutting 1,300 jobs, or 15% of the staff. Further, its Seattle distribution center will operate on a seasonal basis, and it is closing one of its customer service centers.
In other words, Amazon continues to tighten its belt. Retail sales are a challenging, seasonal business -- even online. Amazon will spend the first three quarters of this year still losing money, and for the fourth quarter management is only predicting operating profitability based on pro forma figures.
Investors should realize that this doesn't necessarily mean that Amazon will also produce a net profit, nor is management even suggesting that. If Amazon achieves a modest operating profit in the fourth quarter, it will still have interest expenses to pay on its $2.1 billion in long-term debt (about $36 million in expenses per quarter), and that, alongside other potential costs, would likely keep Amazon from having a net profit (unless it produces investment gains).
Amazon is on the right path financially, but whereas in the past this was a "moonshot" business and nobody knew how far it could go, or how large it might become, the limitations are now showing through like threads in a well-worn shirt -- those limitations include 20% to 30% sales growth this year, and seasonal sales perhaps perpetually. Those limitations also indicate modest profitability levels, at least for the next several years.
The name that Amazon has created for itself among shoppers is very commendable, but for investors, Amazon's stock embodies the many challenges of the business.
Mittlwerweile wird AMZN langsam aber sicher interessant.
Amazon versucht noch in diesem Jahr profitabel zu werden. Frage ist, ob
es klappen wird. Nach langer Ueberlegung werde ich AMZN erstmalig in mein
Depot aufnehmen. Einen Kaufpreis zwischen $14-15 ist noch interessant und
koennte am Ende des Jahres der Renner in meinem Depot werden.
