Walmart has made great strides with its online business and don’t think Amazon hasn’t noticed judging from the online leader’s fourth-quarter results, which reflect substantial investments in staffing and distribution capacity.
Amazon in 2011 added 17 new fulfillment centers bringing its global network to 69 centers and it also increased its number of employees by 67% to support future growth and opportunities CFO Tom Szkutak said the company is fortunate to have.
“We are continually trying to improve all our processes and that includes delivery and fulfillment speed,” Szkutak said during a conference call earlier this week to discuss fourth quarter results which underwhelmed investors.
Amazon enjoyed tremendous sales growth in the fourth quarter, but it came at a steep price as expenses grew faster than sales due to investments to support future growth. Sales increased 35% to $17.4 billion during the quarterly period ended Dec. 31 from nearly $13 billion the same period the prior year and were aided by a slight ($101 million) tailwind related to currency exchange rates. Despite the surge in revenue, profit declined 58% to $177 million or 38 cents a share from a prior year quarterly profit of $416 million or 91 cents a share.
Amazon founder and CEO Jeff Bezos did not comment on the profitability decline in a press release announcing the company’s results, and he didn’t participate in the company’s conference call either, but did thank customers for embracing new products.
“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe,” Bezos said. “Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold.”
As for capital investments in the coming year to further expand distribution capacity, Szkutak declined to elaborate.
“You’ll have to stay tuned, and we’ll keep you updated as we go throughout the year,” Szkutak said in response to a question about how many fulfillment centers the company plans to open in 2012. “We are incredibly optimistic about the opportunity we have and that’s why we have invested the way we have.”
Those investments negatively affected full-year as well as fourth-quarter profits. For the full year, Amazon’s sales increased 41% to $48 billion compared with $34 billion in 2010 while net income decreased 45% to $631 million, or $1.37 per share, compared with net income of $1.15 billion, or $2.53 per share in 2010.