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Amazon’s Q2 Profit Plummets 96%

26 Jul, 2012 By: Erik Gruenwedel

CEO talks up Amazon Prime membership and streaming while company projects possible $350 million operating loss in the third quarter

Amazon July 26 reported second-quarter (ended June 30) profit of $7 million, which was down 96% from net income of $191 million during the previous-year period.

The Seattle-based ecommerce behemoth attributed the drop to unfavorable foreign exchange rates and the acquisition and integration of Kiva Systems — an online order fulfillment service, among other issues.

Indeed, Amazon spent more than $1.3 billion on order-fulfillment expenses in the quarter, up 44% from $941 million in fulfillment expenses last year.

It should be noted that Amazon’s bottom line could be further impacted heading into 2013, when it will be required to charge and collect sales tax in select states — a trend that will likely escalate as additional cash-starved states seek incremental revenue sources.

Amazon said domestic media sales, which include movie discs and electronic sellthrough, increased 18.2% to more than $1.8 billion compared with almost $1.6 billion last year.

Total sales increased 29% to $12.8 billion compared with $9.9 billion last year. Notable drivers included sales of the Kindle Fire tablet. It remains the bestselling product on Amazon since launch. During this same period, the top 10 selling items on Amazon include Kindle, Kindle books and accessories.

“Amazon Prime is now the best bargain in the history of shopping – that is not hyperbole,” said CEO Jeff Bezos, in a statement. “We've also added 18,000 movies and TV episodes available for unlimited streaming.”

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