Amazon Reports A Surprise Profit

By Dennis Callaghan  |  Posted 2002-01-22 Print this article Print

Online retailing giant exceeded expectations to post its first profit – a real net profit, at that – for the fourth quarter of 2001.

On the same day when bricks-and-mortar retailer Kmart filed for bankruptcy, top online retailer Inc. announced its first profit. Amazon on Tuesday declared it had turned a $5 million net profit on $1.12 billion in revenues in the fourth quarter of 2001. That exceeded even the most optimistic expectations for the Seattle-based company, which had given guidance to investors—and had set a goal—that it would turn only an operating profit for the first time in the quarter.
An operating profit (unlike a net profit) does not take into account interest expenses, a significant outlay for Amazon, which is under a mountain of debt after running up staggering losses as it has built its brand. The company paid $35.3 million in interest in the quarter.
In the same quarter a year ago, Amazon lost $545.1 million on $972.4 million in revenue. Amazon also announced that effective today, it will offer free shipping on all orders over $99. "There are two types of retailers: those that work hard to raise prices and those that work hard to lower prices," said Jeff Bezos, founder and CEO of Amazon. "Though both models can be successful, weve decided to relentlessly follow the second model." Amazon, long known for low prices, at one time sold nearly all its products at a loss to win customers. "Our improvements in productivity allowed us to lower book prices and now allow us to offer free shipping, said Warren Jenson, chief financial officer. "We expect that these money-saving initiatives for customers will continue to play an important role in our growth." Amazons streak of profitable quarters may end at one, however. For the first quarter of 2002, it expects a pro forma loss—not taking into account interest expenses and other charges—of up to $16 million. Despite the strong fourth quarter, for the full year 2001, Amazon posted a net loss of $567.3 million on $3.1 billion in revenue.

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