Amazon reported strong fourth quarter earnings on Thursday fueled by stronger sales and rising Prime membership during the crucial holiday period as the Seattle based e-commerce company showed its investors that profits can still be delivered even with the company’s pattern of spending heavily on future investments.
In 2014 Amazon created a new video top box, a digital voice recognition assistant named Echo, and developed new markets for its same day delivery service while the company continued to invest in its fulfillment centers around the globe.
Amazon also launched the Fire phone in 2014 which never caught fire in the consumer market, resulting in the company taking a $170 million write-down last quarter.
In April Amazon raised the price of its Prime membership to $99.00 from $79.00 giving its Prime members full access to its video streaming library, unlimited photo storage, and free 2 day shipping.
The $20.00 price increase didn’t turn consumers away from Amazon Prime because worldwide paid membership grew 53 percent in 2014.
“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping. The data is in and customers agree…. on a base of tens of millions, worldwide paid membership grew 53 percent last year, 50 percent in the U.S. and even a bit faster outside the U.S.,” said founder and Amazon.com CEO Jeff Bezos during the conference call.
Worldwide active customer accounts were approximately 270 million the company reported.
For the quarter, net sales increased 15 percent to $29.33 billion, compared with $25.59 billion in the fourth quarter of 2013 but slightly below the consensus forecast of $29.7 billion.
Amazon’s net sales would have been 3 percent higher if it weren’t for the negative impact from foreign currency exchange rates.
“Excluding the $895 million negative impact from year-over-year changes in foreign exchange rates during the quarter, net sales increased 18 percent compared to fourth quarter 2013” said Brian Olsavsky, Amazon’s VP CFO in Global Consumer Business.
For the entire year of 2014, Amazon had a net loss of $241 million, compared with net income of $274 million in 2013, as the company’s operating expenses climbed 20 percent in 2014.
Amazon reported yesterday that Amazon Web Services (AWS) continues to grow steadily, with usage growth close to 90 percent year-over-year for the fourth quarter of 2014.
New video content will be added for Amazon Prime members in 2015.
Amazon Studios is producing the first television series from director and producer Woody Allen that will debut exclusively on Prime Instant Video in the U.S., U.K., and Germany in 2015.
Amazon forecasts 1Q 2015 sales of 20.9 billion to 22.9 billion, which was below the consensus forecast of 23 billion.