Amazon sales surge after Whole Foods acquisition
It acquired Whole Foods for $13.7 billion in August to help it deliver groceries to shoppers' doorsteps.
- Amazon.com Inc said its sales surged over the summer and profit trounced expectations
- Shoppers jumped at "Prime Day" promotions on its website and bought groceries at its newly acquired chain of Whole Foods Market stores
- Shares rose more than 7% in after-hours trade
Shares rose more than 7 percent in after-hours trade.
Amazon`s results defied expectations that it would invest nearly all of its earnings into new areas as it has in the past. The world`s largest online retailer said net income rose to $256 million, or 52 cents per share in the quarter ended September 30. Analysts on average were expecting 3 cents per share, according to Thomson Reuters I/B/E/S.
"This company has finally gotten itself to the point where it can sustain its spending growth and still leave some crumbs for shareholders," said Wedbush Securities analyst Michael Pachter.
Prime Day, a summer marketing event Amazon has created to replicate the shopping frenzy that is more typical of the winter holiday season, helped boost sales.
Revenue rose 34% to $43.7 billion in the third quarter, including $1.3 billion in sales from Whole Foods. Analysts had expected $42.1 billion.
"We think we`ll also be developing new store formats," he said.
In a first, Amazon broke out sales for its online retail business and for its physical bookstores and Whole Foods locations. Revenue from its online stores jumped 22 percent to $26.4 billion, the fastest growth Amazon has seen in the segment in more than a year.
Key to its success has been signing more people up for Amazon Prime, its fast-shipping and video-streaming club, whose members tend to buy more from the company. Revenue from subscription fees such as Prime grew 59% to $2.4 billion.
And Amazon Web Services (AWS), which handles data and computing for large enterprises, saw its profit margin expand from the previous quarter. It posted a 41.9 percent rise in sales to $4.58 billion, beating the average estimate of $4.52 billion, according to analytics firm FactSet.
Amazon shares have a high valuation, with a price-to-earnings ratio more than eight times that of cloud-computing rival Microsoft Corp
Unlike peers, Amazon runs on razor-thin profit margins because it sinks most of its profit back into its business.
This quarter, which includes the shopping holiday Black Friday, Amazon said it expects operating profit between $300 million and $1.65 billion. Analysts were expecting $930.78 million, according to Thomson Reuters I/B/E/S.
Amazon's profit is going toward a dizzying number of investments: warehouses for faster shipping, data centres for AWS, and a 77% uptick in employees last quarter, including Whole Foods workers.
The commitment to content comes after Amazon Studios chief Roy Price resigned last week, and other top studio hands left the company.
It is unclear what impact the shakeup may have on Amazon`s ability to secure video that competes with Netflix Inc
The company's shares, which closed down 0.05% on Thursday, rose about 7.5% to $1,046 in after-hours trading following the earnings statement. They had gained about 30% this year.