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Supply Chain News: Amazon has Blow Out Q4 Despite Soaring Shipping Cost

 

Amazon Generates Solid Profts, but AWS Web Services Segment Contributes Much of the Operating Income

Feb. 2, 2020
SCDigest Editorial Staff
     

It was a strong quarter in Q4 for Amazon.

Releasing its earnings report last week, Amazon said its net sales increased 21% to $87.4 billion in the fourth quarter. For the full year, revenue was up 20% to an incredible $280.5 billion – that's getting not too far from Walmart's top line.

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Unfortunately, Amazon now longer breaks out net shipping expense nor does it any more specify fulfillment costs (primarily fulfillment center costs not including shipping) as it used to do in the past.


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Amazon's stock price jumped more than 10% on the news.

Amazon saw solid profits this time too, with net come in Q4 of $3.3 billion, up about 10% from Q4 in 2018. That $3.3 billion in profits represent 3.8% of total revenue.

For the full year, operating cash flow increased 25% to $38.5 billion. That compares with $30.7 billion in operating cash generation in 2018. Free cash flow in 2019 increased to $16.2 billion in 2019, compared with $11.6 billion in 2018.

That despite the fact that Amazon said it spent $12.9 billion on worldwide shipping costs in Q4, up 43% versus revenue growth in the quarter of only about 20%. The company said in its last earnings report in October that it would spend $1.5 billion during the holiday shopping season to expand one-day and same-day delivery.

But that investment in shipping appears to be paying off in terms of driving sales growth.

In Q4, North American sales – excluding its AWS web services unit - came in at $44 billion, versus about $21 billion in international revenue. The AWS unit sales of $7.4 billion in Q4.

But AWS generated $2.1 billion in operating income in the quarter, almost the same as the $2.2 billion in operating income in North America, while international had negative operating income of -$642 million in Q4.

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Combined, operating income was $3 billion in Q4 and $10 billion for the full year.

Amazon's physical-store sales, which is mainly comprised of Whole Foods, saw its revenue decline 1% year over year to $4.36 billion.

The company said it expects net sales in Q1 2020 to be between $69.0 billion and $73.0 billion, or to grow between 16% and 22% compared with first quarter 2019.

Unfortunately, Amazon now longer breaks out net shipping expense – shipping expense less shipping revenues, such as Prime member subscriptions – nor does it any more specify fulfillment costs (primarily fulfillment center costs not including shipping) as it used to do in the past.


What do you think of Amazon's results? Let us know your thoughts at the Feedback section below.


 
 

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