By Joseph Galante
Jan. 30 (Bloomberg) -- Amazon.com Inc., the world’s largest online retailer, gained 15 percent in early U.S. trading after fourth-quarter sales and profit topped estimates, signaling the company is outpacing EBay Inc. and its e-commerce rivals.
Net income rose 8.7 percent to $225 million, or 52 cents a share, the company said yesterday after markets closed. Sales climbed 18 percent to $6.7 billion. That beat estimates of 38 cents in profit and $6.45 billion in sales from a Bloomberg survey of analysts.
Amazon.com had its biggest holiday season ever, using low prices, shipping promotions and product selection to attract shoppers during a recession. At EBay, holiday sales fizzled, with quarterly revenue dropping for the first time in the company’s history. Amazon’s size and customer service gave it an edge, said Scott Devitt, an analyst at Stifel Nicolaus & Co.
“Amazon is a company that treats its customers better than EBay,” Devitt said. The Manassas, Virginia-based analyst recommends buying Amazon.com shares and has a hold rating on EBay. “From a competitive standpoint between the two, I don’t think there’s any turning back.”
Amazon.com, based in Seattle, jumped $7.31 to $57.31 in trading before U.S. exchanges opened, after closing at $50 on the Nasdaq Stock Market yesterday. The shares had dropped 2.5 percent this month before today. EBay, down 12 percent in January, fell 3.7 percent to $12.25 yesterday.
Sales Forecast
Amazon.com outpaced the rest of the e-commerce market over the past two years and that’s likely to continue, according to JPMorgan Chase & Co. Even as the U.S. economy lost 2.6 million jobs last year, the company maintained growth.
First-quarter net revenue will rise to between $4.53 billion and $4.93 billion, an increase of as much as 19 percent, the company said. Analysts had estimated sales of $4.55 billion.
Amazon.com will continue to focus on low prices and free shipping to drive revenue, Chief Executive Officer Jeff Bezos said yesterday. Still, those sales will carry lower profit margins. Operating income, a measure of profitability, will decline as much as 37 percent to $125 million this quarter, from a year ago, the company said.
EBay, an online forum that lets sellers auction items or set fixed prices, reported a 6.6 percent sales decline last week. The San Jose, California-based company blamed the global e-commerce slump.
Listing Fees
Chief Executive Officer John Donahoe had sought to boost sales by changing EBay’s listing fees and bolstering the company’s payments unit. EBay now takes a smaller cut when someone lists a product on its site and a bigger commission when the product sells.
Donahoe is trying to boost the number of fixed-price listings, putting EBay in closer competition with Amazon.com and Wal-Mart Stores Inc.’s Web site. The company also has changed its search feature, which now mixes fixed-price results with auction results. The changes have alienated some merchants.
Amazon.com sells products in more than three dozen categories, ranging from power tools to musical instruments. Once just a book seller, the company opened a site last year that offers more than 300,000 parts and accessories for motorcycles and all-terrain vehicles.
Bezos also has expanded sales of digital media, such as music and video files. The company introduced the Kindle digital- book device in 2007 to encourage book, magazine and newspaper downloads. Kindles have sold out for two straight years ahead of the holiday shopping season.
U.S. online retail sales growth will slow this year to 11 percent, or $156 billion, from 13 percent last year, according to Forrester Research Inc.
Amazon.com has “discounted heavily in order to maintain market share and drive revenue,” Fred Moran, an analyst at Stanford Group in Boca Raton, Florida, said in a Bloomberg Television interview. “Given the environment, that might be the right way to go.”
To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net
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