Amazon Will Hunker Down on Food and Alexa in 2018

no thumb Inc. (AMZN) reported one of its best fourth quarters ever on Thursday, Feb. 1, with Alexa at the forefront of its recent milestones. Planning ahead, the e-commerce giant said it will focus on capital investments in the grocery and food sector in 2018.

Music listening on Alexa devices, for instance, was up three times in the fourth quarter, according to Chief Financial Officer Brian Olsavsky. Alexa usage on the Amazon Fire TV Stick rose nine times year-over-year.

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down,” CEO Jeff Bezos said in the earnings statement. “We’ve reached an important point where other companies and developers are accelerating adoption of Alexa.”

The Echo Dot and Fire TV Stick, both Alexa-enabled devices, were Amazon’s best-selling items in 2017. Echo alone was sold in the tens of millions, the company said. With more than 30,000 skills, Alexa’s adoption among consumers is accelerated by partnerships with external companies.

Alexa Voice Service was integrated on a number of PC-brand computers, for instance, as well as within Toyota cars.

In the fourth quarter, the internet behemoth posted earnings of $3.75 per share in three months ending on Dec. 31, or nearly double the Wall Street forecast of $1.88. Net sales reached $60.5 billion, up 38% since the same period last year. In North America, sales increased 42%, while the international segment saw a 29% uptick. Picking up its slack from the past year, Amazon Web Services also boasted an impressive jump: 45%.

The strength in sales, according to Olsavsky, can be attributed to improved warehouse efficiencies and increased advertising revenues. Operationally, it was “probably one of the cleaner Q4s recently,” he said.

AWS reached its highest revenue in at least a year and comprised 10% of total net sales. Though its growth may be slower than that of Microsoft’s Azure, AWS by far dominates market share with a revenue of $5.1 billion this quarter.

In addition to Alexa and AWS, Amazon will continue to invest in its fulfillment capacity and video content production for Prime Video. But its biggest categorical focus, however, will be “groceries and consumables with the Whole Foods acquisition,” Olsavsky told analysts.

“We continue to look at our whole offering of AmazonFresh, Prime Now, Whole Foods, how can they work together to create better and better offerings for our customer base,” he said.

So far, Amazon has slashed prices in Whole Foods stores, resulting in a brick-and-mortar revenue of $4.5 billion, and has begun developing a Prime-based rewards program for Whole Foods customers.

Amazon kept mostly mum on its private label ambitions, calling its development of independent product lines a “supplement” for what’s already offered by vendors and sellers on the site.

“We’ve not broken out kind of how significant or how large that is,” Olavsky said. 

Amazon shares are up more than 6% in after-hours trading. 

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