Goodnight Amazon: World's Most Overhyped Retailer Misses Top Line

Tyler Durden's picture

All one can say is oops. That margin compression sure does suck:

  • Q4 EPS USD 0.91 vs. Exp. USD 0.88
  • Q4 net sales USD 12.95bln vs. Exp. USD 13.03bln
  • Net sales are expected to be between $9.1 billion and $9.9 billion, or
    to grow between 28% and 39% compared with first quarter 2010
  • Operating income is expected to be between $260 million and $385
    million

We have yet to see snow being blamed for the After Hour stock collapse

And a whole lot of momentum chasers got wiped out all over again. From Dow Jones earlier:

Amazon appears to have pre-earnings bullish bias. About 62,000 calls traded on online retailer Amazon.com, double its average daily volume against 40,000 puts near midday heading into its earnings after the closing bell, according to Trade Alert. "We are seeing a modest bid up in call premium and a reduction in the premium in puts," said Steve Place, a founder of investingwithoptions.com. "That indicates to us that the majority of call options were bought today and the majority of puts were sold. That's pretty bullish on today's morning price action." The busiest contract is the weekly $190 strike calls which expire this Friday with volume of 5,070 contracts, Trade Alert data show. Amazon options this morning are pricing in about a 6.4 percent post earnings move in the stock price based on the front month average of the $180 and $185 straddles, Place said. He notes the close-to- close movement historically for Amazon earnings is not that big but the maximum movement for the trading day is quite large.

Full release:

Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its
fourth quarter ended December 31, 2010.

Operating cash flow increased 6% to $3.50 billion for the trailing
twelve months, compared with $3.29billion for the
trailing twelve months ended December 31, 2009. Free cash flow decreased
14% to $2.52 billion for the trailing twelve months, compared with $2.92
billion for the trailing twelve months ended December 31, 2009.

Common shares outstanding plus shares underlying stock-based awards
totaled 465 million on December 31, 2010, compared with 461 million a
year ago.

Net sales increased 36% to $12.95 billion in the fourth quarter,
compared with $9.52 billion in fourth quarter 2009. Excluding the $139
million unfavorable impact from year-over-year changes in foreign
exchange rates throughout the quarter, net sales would have grown 37%
compared with fourth quarter 2009.

Operating income was $474 million in the fourth quarter, compared with
$476 million in fourth quarter 2009. The unfavorable impact from
year-over-year changes in foreign exchange rates throughout the quarter
on operating income was $18 million.

Net income increased 8% to $416 million in the fourth quarter, or $0.91
per diluted share, compared with net income of $384 million, or $0.85
per diluted share, in fourth quarter 2009.

"Thanks to our customers, we achieved two big milestones," said Jeff
Bezos, founder and CEO of Amazon.com. "We had our first $10 billion
quarter, and after selling millions of third-generation Kindles with the
new Pearl e-ink display during the quarter, Kindle books have now
overtaken paperback books as the most popular format on Amazon.com. Last
July we announced that Kindle books had passed hardcovers and predicted
that Kindle would surpass paperbacks in the second quarter of this year,
so this milestone has come even sooner than we expected - and it's on
top of continued growth in paperback sales."

Full Year 2010

Net sales increased 40% to $34.20 billion, compared with $24.51 billion
in 2009. The unfavorable impact from year-over-year changes in foreign
exchange rates throughout the year on net sales was $86 million.

Operating income increased 25% to $1.41 billion, compared with $1.13
billion in 2009. The unfavorable impact from year-over-year changes in
foreign exchange rates throughout the year on operating income was $28
million. In 2009, operating income was negatively impacted by a $51
million legal settlement.

Net income increased 28% to $1.15 billion in 2010, or $2.53 per diluted
share, compared with net income of $902 million, or $2.04 per diluted
share, in 2009.

Highlights

 

  • Amazon.com is now selling more Kindle books than paperback books.
    Since the beginning of the year, for every 100 paperback books Amazon
    has sold, the Company has sold 115 Kindle books. Additionally, during
    this same time period the Company has sold three times as many Kindle
    books as hardcover books. This is across Amazon.com's entire U.S. book
    business and includes sales of books where there is no Kindle edition.
    Free Kindle books are excluded and if included would make the numbers
    even higher.
  • The Company sold millions of third-generation Kindle devices with the
    new advanced paper-like Pearl e-ink display in the fourth quarter and
    the third-generation Kindle eclipsed "Harry Potter and the Deathly
    Hallows" as the bestselling product in Amazon's history.
  • The U.S. Kindle Store now has more than 810,000 books including New
    Releases and 107 of 112 New York Times Bestsellers. Over 670,000 of
    these books are $9.99 or less, including 74 New York Times
    Bestsellers. Millions of free, out-of-copyright, pre-1923 books are
    also available to read on Kindle.
  • Amazon added to its growing list of "Buy Once, Read Everywhere" Kindle
    apps, launching a Kindle app for Windows Phone 7. In addition, the
    Kindle for Android app was updated to enable users to buy, read and
    sync over 100 Kindle newspapers and magazines. All Kindle apps let
    customers "Buy Once, Read Everywhere"--on Kindle, Kindle 3G, Kindle DX,
    iPad, iPod touch, iPhone, Mac, PC, BlackBerry and Android-based
    devices. All Kindle apps are free and incorporate Amazon's Whispersync
    technology, which allows readers to seamlessly switch between devices.
    With Kindle Worry-Free Archive, books purchased from the Kindle Store
    are automatically backed up online in the Kindle library on Amazon
    where they can be re-downloaded wirelessly for free, anytime.
  • The Company announced Price Check for iPhone, a new price comparison
    app that provides shoppers an easy way to compare in-store prices with
    the low prices from Amazon.com and other online merchants. Shoppers
    can use the app to scan a barcode, snap a picture, or say or type a
    product name to instantly see online prices for that item. Over the
    Black Friday-Cyber Monday weekend, mobile shoppers used Price Check to
    look up prices over a million times. In December, shoppers used the
    app more than two million times to check prices.
  • North America segment sales, representing the Company's U.S. and
    Canadian sites, were $7.21 billion, up 45% from fourth quarter 2009.
  • International segment sales, representing the Company's U.K., German,
    Japanese, French, Chinese and Italian sites, were $5.74 billion, up
    26% from fourth quarter 2009. Excluding the unfavorable impact from
    year-over-year changes in foreign exchange rates throughout the
    quarter, sales grew 29%.
  • Worldwide Media sales grew 12% to $5.23 billion. Excluding the
    unfavorable impact from year-over-year changes in foreign exchange
    rates throughout the quarter, sales grew 13%.
  • Worldwide Electronics & Other General Merchandise sales grew 60% to
    $7.39 billion. Excluding the unfavorable impact from year-over-year
    changes in foreign exchange rates throughout the quarter, sales grew
    62%.
  • The Company launched Amazon.it, an Italian-language website offering
    customers a vast selection of books, DVDs, video games, music and
    consumer electronics at everyday low prices. Amazon.it's convenient
    services include Amazon Prime, the membership program with unlimited
    free guaranteed 2-3 day delivery at an annual fee of 9.99 Euros. The
    first product sold on Amazon.it was a Canon Pixma printer to a new
    Prime customer in Turino, Italy.
  • Amazon Web Services (AWS) announced lowered usage pricing on existing
    Premium Support offerings by 50% and added two new support plans to
    meet the needs of developers and enterprises of all sizes and
    technical ability. In addition to the existing Silver and Gold support
    plans, AWS now offers a Bronze support plan for $49 per month and a
    Platinum support plan that provides 15 minute response times and
    dedicated Technical Account Managers.
  • AWS achieved Level 1 Payment Card Industry (PCI) compliance,
    continuing its commitment to providing the security certifications
    developers and enterprises care about. Merchants and other service
    providers can now run their applications on AWS PCI-compliant
    technology infrastructure to store, process and transmit credit card
    information in the cloud.
  • AWS launched Elastic Beanstalk, an easy way for developers to quickly
    deploy applications to AWS and manage applications in the AWS cloud.
    Elastic Beanstalk automatically scales up and down as needed so
    developers don't need to worry about configuring their infrastructure
    requirements in AWS. Unlike existing application containers or
    "platform as a service" offerings that force developers to accept
    infrastructure decisions pre-determined by the vendor, Elastic
    Beanstalk allows developers to "open the hood" to tinker with the AWS
    resources powering their applications. AWS customers can now choose to
    have as much automation or as much control as they wish.

Financial Guidance

The following forward-looking statements reflect Amazon.com's
expectations as of January 27, 2011. Our results are inherently
unpredictable and may be materially affected by many factors, such as
fluctuations in foreign exchange rates, changes in global economic
conditions and consumer spending, world events, the rate of growth of
the Internet and online commerce and the various factors detailed below.

First Quarter 2011 Guidance

 

  • Net sales are expected to be between $9.1 billion and $9.9 billion, or
    to grow between 28% and 39% compared with first quarter 2010.
  • Operating income is expected to be between $260 million and $385
    million, or between 34% decline and 2% decline compared with first
    quarter 2010.
  • This guidance includes approximately $140 million for stock-based
    compensation and amortization of intangible assets, and it assumes,
    among other things, that no additional business acquisitions or
    investments are concluded and that there are no further revisions to
    stock-based compensation estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and
will be available for at least three months at www.amazon.com/ir.
This call will contain forward-looking statements and other material
information regarding the Company's financial and operating results.

These forward-looking statements are inherently difficult to predict.
Actual results could differ materially for a variety of reasons,
including, in addition to the factors discussed above, the amount that
Amazon.com invests in new business opportunities and the timing of those
investments, the mix of products sold to customers, the mix of net sales
derived from products as compared with services, the extent to which we
owe income taxes, competition, management of growth, potential
fluctuations in operating results, international growth and expansion,
the outcomes of legal proceedings and claims, fulfillment center
optimization, risks of inventory management, seasonality, the degree to
which the Company enters into, maintains and develops commercial
agreements, acquisitions and strategic transactions, and risks of
fulfillment throughput and productivity. Other risks and uncertainties
include, among others, risks related to new products, services and
technologies, system interruptions, government regulation and taxation,
payments and fraud. In addition, the current global economic climate
amplifies many of these risks. More information about factors that
potentially could affect Amazon.com's financial results is included in
Amazon.com's filings with the Securities and Exchange Commission
("SEC"), including its most recent Annual Report on Form 10-K and
subsequent filings
.

Our investor relations website is www.amazon.com/ir
and we encourage investors to use it as a way of easily finding
information about us. We promptly make available on this website, free
of charge, the reports that we file or furnish with the SEC, corporate
governance information (including our Code of Business Conduct and
Ethics), and select press releases and social media postings.