Amazon says, “Recession? What recession?”
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If a recession happens in America, does the Amazon hear it?
Apparently not. Amazon.com said today that its holiday season was its ‘best ever’ and that its fourth-quarter profit rose 9% from the same period a year earlier. Amazon said its profit in the fourth quarter was $225 million, or 52 cents a share. Analysts, on average, had been expecting 39 cents per share, according to Thomson Reuters.
Sales of items such as books, CDs and DVDs rose 9% to $3.64 billion, while sales of electronics and other merchandise jumped 31% to $2.89 billion. Still, Chief Financial Officer Tom Szkutak said price reductions cut into Amazon’s gross profit margin. It declined to 20.1% from 20.6% in the fourth quarter of 2007. Tough times, indeed.
While Amazon is predicting a solid first quarter of 2009, Forrester Research released a study today saying U.S. e-commerce will slow this year to a growth rate of 11% as consumers cut back on spending. Forrester projected $156 billion will be spent online this year, up from $141 billion last year, with growth slowing from 13% in 2008 and 18% the year before.
‘Even as companies continue to struggle, the important take-away is that the Web is continuing to grow,’ Forrester analyst Sucharita Mulpuru said in the study. ‘It’s taking wallet share away from the rest of the retail world.’ Mulpuru pointed to brick-and-mortar companies such as Best Buy Co. Inc. and Macy’s Inc. whose online sales continue to grow despite weaker store sales.
‘That’s pretty standard that the Web divisions of all of these companies are faring much better than the rest of the business. Those are the ones grabbing disproportionate market share,’ she added. ‘A lot of that is happening at the expense of smaller players who are not as branded or not as trustworthy or not as easy to find online.’
In the latest example of brick-and-mortar retail weakness, department store operator Bon-Ton Stores Inc. said today that it would slash about 1,150 jobs, get rid of 2008 senior executive bonuses and cut merit-based raises as it tries to slash costs. Bon-Ton said its actions will also suspend company contributions to the 401(k) program, adjust inventory levels and low capital spending.
Bon-Ton runs 281 stores in 23 states in the Northeast, Midwest and upper Great Plains under the Bon-Ton, Bergner’s, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s and Younkers names. It also has stores under the Parisian name in the Detroit area.
-- Julie Makinen
