Business

Amazon launches grocery service for Prime members as profit rises

Amazon.com Inc. said its first-quarter profit rose 18% as shoppers continued to flock to the online mega retailer to buy goods.

Results beat expectations and shares rose nearly 2% in after-market trading.

Amazon has long focused on spending the money it makes to grow its business and expand into new areas, including movie streaming, e-readers and even grocery delivery.

On Wednesday, it launched Prime Pantry, a grocery delivery service for Prime members. And this month it introduced its first set-top video streaming box called Amazon Fire that sells for $99. Rumors of an Amazon phone have been swirling as well, but nothing has materialized.

"We get our energy from inventing on behalf of customers, and 2014 is off to a kinetic start," Chief Executive Jeff Bezos said.

Although investors have largely given Amazon a pass for focusing on growth and investing rather than turning a strong profit, Amazon has been making some moves lately to strengthen its bottom line. It boosted its Prime two-day shipping membership program annual fee from $79 to $99 in March to offset higher shipping costs.

Shipping costs rose 31% to $1.83 billion during the quarter.

To entice more people to sign up for the Prime service at the $99 price, which includes its streaming video service, the retailer said Tuesday that it had made a deal with HBO to stream some of its older shows online beginning May 21. The news was a coup for Amazon because HBO has steadfastly refused to license any of its programming to other streaming services such as Netflix or Hulu.

In a conference call, Amazon executives did not give specifics but said Prime renewals were exceeding expectations.

Amazon's net income for the quarter rose to $108 million, or 23 cents a share, from $82 million, or 18 cents, a year earlier. Analysts expected 21 cents a share, according to FactSet.

Revenue rose 23% to $19.74 billion. Analysts expected $19.42 billion.

In fiscal 2014, the company expects revenue of $18.1 billion to $19.8 billion. Analysts expect $19.01 billion.

In after-market trading, Amazon shares rose $6.35, or 1.9%, to $343.50 after closing up nearly 4% at $337.15. The stock reached an all-time high of $408.06 on Jan. 22. Since then, it has dropped 17%.

Copyright © 2014, Los Angeles Times
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