Amazon doubles profit to $2b in Q1, raises Prime price

SAN FRANCISCO • Amazon.com has reported that its profit more than doubled to US$1.6 billion (S$2.1 billion) and predicted strong spring results as the world's biggest online retailer raised the price for US Prime subscribers, added US football games and touted its cloud services for business.

The results released on Thursday showed the broad strength of the company, which has been expanding far beyond shipping packages, the business that has drawn the ire of US President Donald Trump.

The forecast beat expectations on Wall Street, sending shares up 7 per cent to a new record high in after-hours trade and adding US$8 billion to the net worth of Mr Jeff Bezos, Amazon's chief executive and largest shareholder.

Seattle-based Amazon is winning business from older, big-box rivals by delivering virtually any product to customers at a low cost, and at times faster than it takes to buy goods from a physical store.

It is expanding across industries too, striking a US$130 million deal to stream Thursday night games for the US National Football League online and working to ship groceries to doorsteps from Whole Foods stores nationwide.

Sales jumped 43 per cent to US$51 billion in the first quarter, topping estimates of US$49.8 billion, according to Thomson Reuters.

Prime, Amazon's loyalty club, which includes fast shipping, video streaming and other benefits, has been key to its strategy. Its more than 100 million members globally spend above average on Amazon.

The company announced on Thursday it will increase the yearly price of Prime to US$119 from US$99 for US members this spring. The fee hike is expected to add a windfall to Amazon's subscription revenue, already up 60 per cent in the first quarter at US$3.1 billion.

"We do feel it's still the best deal in retail," Amazon chief financial officer Brian Olsavsky said on a call with analysts. He said the number of items Prime members can get within two days had grown fivefold since the last price increase four years ago. Despite the surge in shopping, he gave credit for Amazon's US$1.6 billion profit to two younger businesses: advertising and Amazon Web Services.

Revenue from third-party sellers paying to promote their products on Amazon.com was an unusually large bright spot during the quarter, with sales in the category growing 139 per cent to US$2.03 billion. This included US$560 million from an accounting change.

Amazon said it expects operating profit this quarter of between US$1.1 billion and US$1.9 billion, up from US$628 million a year earlier. Analysts expect US$1.01 billion, said analytics firm FactSet.

REUTERS

A version of this article appeared in the print edition of The Straits Times on April 28, 2018, with the headline 'Amazon doubles profit to $2b in Q1, raises Prime price'. Print Edition | Subscribe