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Tax Boost And Sales Drive Amazon To Post Its Largest Profit Ever

Tax Boost And Sales Drive Amazon To Post Its Largest Profit Ever
Two drivers - changes to U.S. tax law that added to its bottom line and the Prime fast-shipping club that added millions of customers during the holiday season, saw the profits of reach the highest in its history as the firm reported a profit of about $2 billion.
There was a rise of over 6 per cent in extended trading in the shares of the company.
High-spending Prime members are being attracted by the Seattle-based Amazon by venturing into new technology, such as its voice-controlled Alexa devices, addition exclusive television shows on its website and the use of fast shipping. The grocery sales of the company through Whole Foods Market is also seeking an increase after price cuts, the company said. The U.S. grocer was purchased by Amazon for $13.7 billion last year.
In the fourth quarter ended December 31, the net income of the company was $1.86 billion, or $3.75 per share which is double compared to the same period last year, said the world's largest online retailer. The changed tax regulations also provided provisional $789 million boost to its profit. Wall Street had anticipated just $1.85 per share.
“This was another blow-out quarter for Amazon,” said GBH Insights analyst Daniel Ives. “The retail strength was eye-popping as the company had a banner holiday season and looked to capture roughly 50 percent of all e-commerce holiday season sales.”
Amazon’s biggest-ever by revenue was the period beginning just before the U.S. Thanksgiving holiday till New Years. Estimates of sales were beaten as it rose by 38 percent to reach $60.5 billion in the quarter.
Those holiday shoppers who wanted to bypass the crowds of big box retailers were enticed to Amazon by its fast delivery service such as the two-hour Prime Now service. Last quarter, there were over 4 million sing ups to the Prime in just one week and there was a growth of 49 percent in revenue from subscription fees to reach $3.2 billion, the company said.
According to analysts at Cowen & Co, some 30 per cent of Prime subscribers would be impacted by a rise in the fee for month-to-month Prime plans and as such this quarter, the subscription fee revenue is expected to also rise. It is estimated that about half of all U.S. households or about 60 million are Prime subscribers.
There was a rise of 62 per cent in advertising and other revenue to touch $1.74 billion.
“A key contributor” to the company’s growing profit margin was advertising, said Brian Olsavsky, Amazon’s chief financial officer, while on a call with analysts.
Amazon’s voice aided device Alexa, a part of the amazon’s’ Echo speakers and Fire TV players, and ones that forms attachments in some cars and house gadgets proved to be the surprise element in the last quarter. Olsavsky said that in the past year, Alexa was used to order goods by voice by millions of Amazon customers.
“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” added Jeff Bezos, Amazon’s founder and chief executive, in a statement. “We don’t see positive surprises of this magnitude very often — expect us to double down.”

Christopher J. Mitchell

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