Will Amazon Keep Growing?
Amazon (NASDAQ:AMZN) showed its strength in the last quarter with heightened sales and a widened operating margin in North America. While the current quarter isn’t expected to be is bright, Amazon seems to be shaping up for a strong future in e-commerce.
While Amazon’s fourth-quarter sales fell below analysts’ average projection of $22.2 billion, reaching a close $21.3 billion — net income also fell to $97 million from $177 million a year earlier — Amazon still managed to impress investors with an operating margin in North America that climbed from 2.9 percent a year ago to 5 percent in the October through December period.
According to Amazon CEO Jeff Bezos, the increased operating margin is a sign the company’s investments are paying off. Amazon has been putting significant amounts of money into fulfillment, with an increase of 36 percent to $2.26 billion going toward fulfillment last quarter. The company also opened 20 new shipment hubs last year, thereby increasing its ability to service and maintain customers…
The fourth quarter also saw operating income rise to $405 million, this time exceeding estimates of $212.1 million. However, Amazon doesn’t expect to fare so well for the first quarter this year, with an operating income expected between a $285 million loss and a $65 million profit.
While Amazon’s operating margin in North America grew, its global operating margin was less exciting, remaining below 2 percent at 1.9 percent, despite reduced shipping costs, which dropped to 4.5 percent of worldwide sales, from 5.4 percent a year earlier.
While figures are shifting quarter to quarter all across the board, the future growth of e-commerce is probably the most significant thing for Amazon to look at. The e-commerce market last year was worth $512 billion, but that number is estimated to grow to $1 trillion by 2016, and Amazon’s share could be as much as 23.5 percent. This would mean massive earnings for the company in the future, especially as it does more to reduce its shipping-related costs and works with third-party sellers and digital content to earn profits without paying for shipping.
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