It isn’t easy being Amazon. Investors criticize you for a lack of profits yet remain bullish. You then deliver an all-time high profit over the last 20 years you’ve been in business, and The Street throws you under the bus.
To the tune of a 13 percent drop in post-trading stock prices.
And mind you, Amazon’s quarterly profit was $482 million — more than double its Q4 2015 profit of $214 million and when news of a profit sent Amazon stock soaring by as much as 12 percent in after-hours trading that year.
But analysts wanted more.
A year ago, everyone was just crossing their fingers (and toes) that Amazon would deliver and finally turn a profit after disappointing on that oh-so-important metric for so long. Now, with a decent profit under its belt, there were a few other things that took Amazon out to the proverbial investor and media woodshed after failing to meet analysts’ expectations on two dimensions.
The first was sales, a smidge lower than analysts’ expectations — $35.7 billion (actual) versus $35.9 billion (projected) — even though that figure, too, was up from Q4 2014’s $29.3 billion. (Operating income increased 88 percent to $1.1 billion in the quarter, up from 2014’s figures of $591 million.)
But what might have really thrown investors for a loop was the increase in fulfillment costs — by some 30 percent. Those costs, investors believe, are going in the wrong direction, especially since gas prices are so low. Bring in the drones!
But in one key area for Amazon, expectations are paying off. Or, at least, the numbers Amazon provided about its Prime membership growth suggest so.
Amazon CFO Brian Olsavsky revealed that Amazon Prime membership grew by more than 51 percent. Of course, he didn’t give the one number everyone was sitting on the edge of their seats to hear during the call (how many members it actually has to put that growth into context). But when broken down by region, Prime grew 47 percent in the U.S and grew 51 percent when accounting for its global audience.
One industry estimate released this week pegged Amazon’s Prime membership at 54 million. But your and their guess is as good as ours, since Amazon doesn’t publicly disclose those figures.
So, for now, we’ll just have to take estimates. At least, until Amazon is willing to let the cat out the bag on the specific figure of its “crème de la crème” customers. PYMNTS did learn earlier this week, via an interview with Patrick Gauthier, Amazon’s VP of payments, that Amazon has a total of 294 million customers.
Gauthier also told PYMNTS that more than 50 percent of Pay with Amazon customers who use the option are Prime members and that more than 23 million customers have used its Pay with Amazon button to pay on a third-party merchant website.
He also shared some key figures about Prime members, which could be particularly relevant to merchants who wonder if Amazon should be considered a friend or foe. Prime members tend to be more affluent. A recent comScore study indicated that 60 percent of those 23 million Pay with Amazon customers have a household income of more than $100,000.
That was Amazon showing what Gauthier said was “a little leg.” We’d love to see more, of course.
One point worth noting in Amazon’s results that was only briefly mentioned during the earnings call: Amazon’s growth in what it calls its Exclusives — products that can’t be found anywhere else. Sales for that specific category increased $50 million (in less than a year post-launch) for the platform that consists of 120 brands.
Amazon released this type of data, which is part of its third-party marketplace platform, for the first time to show how much interest that segment of its business is getting. In general, third-party merchants account for 40 percent of Amazon’s sales. Amazon also has plans to expand Launchpad, its marketplace section for crowdfunded products. It currently has 10,000 products.
“We do expect the broadening of the product categories and geographical expansion,” Peter Sauerborn, director of business development at Amazon, who leads the store, said in an interview.
For Amazon’s full year 2015, it saw net sales increase 20 percent to $107 billion, up from 2014’s $89 billion. Income for the year was $2.2 billion, and profit for the year totaled $596 million, up drastically from the loss of $214 million in 2014. First quarter guidance provided was for net sales to be between $26.5 billion and $29 billion.
And, as always, CEO Jeff Bezos didn’t appear phased about the earnings miss on The Street. Instead, he focused on prepared remarks on how far the company has come.
“Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers,” Bezos wrote in his prepared remarks. “And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like Day 1.”
In reality, it’s more like Day 8,000, and Bezos’ empire has grown far beyond where he probably imagined. But there’s pressure that comes with the territory of being Amazon in 2016, especially when investors have been consistently promised that Amazon’s “investment mode” would pay off big.
And, for investors, that appears to be the ability to deliver, literally, with a margin.