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Tech Spending Curbs Amazon's Q1 Profits

25 Apr, 2006 By: Jessica Wolf

Amazon.com's net earnings were down nearly 35% for the first quarter, to $51 million, the company announced April 25. Net earnings for the first quarter of 2005 were $78 million, although that included a $26 million gain attributed to a change in accounting principle.

Net sales increased 20% in the first quarter, to $2.28 billion, compared to $1.90 billion in 2005.

Sales for the company's North American business segment, which includes the United States and Canada, were up 21% year-over-year to $1.25 billion.

International sales increased 18% to $1.03 billion.

Company executives highlighted the site's ongoing membership program that launched in February 2005, Amazon Prime — for $79 per year, members get free unlimited express two-day shipping with no minimum purchase requirement for themselves and four household members.

“We're pleased to see strong quarter-to-quarter sequential growth for new Amazon Prime subscriptions,” said Jeff Bezos, founder and CEO of Amazon.com. “This sequential growth comes off our biggest holiday season ever, and one where new subscriptions to Amazon Prime more than doubled from November to December.”

Meanwhile, Amazon's technology spending increased about 50% for the quarter.

Amazon executives said they plan to appeal a recent court decision that would effectively shut down the e-tailer's online partnership with Toys ‘R' Us, which could cost the company as much as $50 million for the year.

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