Colin Gillis Comments: Amazon.com Says Quarterly Sales May Accelerate After Recession- BusinessWeek

Amazon.com Inc., the world’s largest Internet retailer, posted profit and sales that beat analysts’ estimates and said revenue growth may accelerate this quarter as consumers start spending more following the recession.

Sales may rise as much as 43 percent to $7 billion in the first quarter, more than last year’s 18 percent growth, the Seattle-based company said yesterday in a statement. Analysts surveyed by Bloomberg had estimated sales of $6.42 billion.

Amazon.com, whose shares more than doubled last year, continues to top analysts’ estimates even though doubts remain about the strength of a rebound in U.S. consumer spending. Amazon.com gained market share over rivals as online spending outpaced sales at traditional retail stores during the holiday season, according to Benchmark Co.

“It was a better-than-expected quarter and a call for accelerating growth,” said Fred Moran, an analyst at Benchmark in Boca Raton, Florida. “Everything we’re seeing in technology looks extremely encouraging that a consumer comeback is upon us. The sustainability of the comeback remains the caution flag.”

Amazon.com rose $3.17, or 2.5 percent, to $129.20 in extended trading yesterday after closing at $126.03 on the Nasdaq Stock Market.

Net income in the fourth quarter jumped 71 percent to $384 million, or 85 cents a share, beating estimates. Sales also topped estimates, rising 42 percent to $9.52 billion.

Stock Buyback

The company said it may repurchase as much as $2 billion of its stock. The share buyback, which replaces a $1 billion program authorized in 2008, has no expiration date, Amazon.com said.

The company should use its cash to find ways to lower costs, particularly as it enters a time of year when sales are traditionally slower, said David Garrity, principal at GVA Research LLC in New York.

“What’s the wisdom of buying back the stock?” Garrity said on Bloomberg Television. “Continuing to cut prices is probably going to be the better thing to do.”

Sales from international operations, including those in the U.K., Germany, Japan, France and China, rose 48 percent to $4.56 billion, accounting for 48 percent of revenue, Amazon.com said. Global media sales, which includes books and digital music, advanced 29 percent to $4.68 billion in the quarter. Before foreign exchange fluctuations, the growth rate was 23 percent.

“There’s a recovery going on,” said Colin Gillis, an analyst at BGC Financial LP in New York. “Amazon is assisted by the tailwinds of e-commerce. The degree that the U.S. consumer is going to come roaring back remains to be seen.”

New Product Categories

The company’s growth in new categories such as patio furniture and downloadable films, TV and games has allowed it to get better deals from vendors, which helped boost profitability, Chief Financial Officer Tom Szkutak said.

“Some of the categories we started in just a few years ago are becoming more meaningful,” he said on a conference call.

Apple Inc. and Sony Corp. are creating new competition for Amazon.com’s Kindle, which sells for $259 and $489. Apple’s iPad, which can display books, surf the Web and show video, starts at $499. Sony introduced a touch-screen reader in August for $299. By the end of 2011, the iPad will be almost even with sales of the Kindle, which now has about 60 percent of the market, according to Cambridge, Massachusetts-based Forrester.

Szkutak said the company is focused on making devices designed specifically for reading and declined to comment further on the iPad.

“Readers deserve a dedicated device,” Szkutak said.

Online retail spending for the November-December holiday season rose 4 percent to $29.1 billion from a year earlier, according to Reston, Virginia-based research firm ComScore Inc. That contrasts with a 1.1 percent gain in total retail holiday sales, according to the National Retail Federation.

 Forrester predicts that online sales in the U.S. will expand 13 percent this year and 10 percent in 2011

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