First quarter sales for online retailer Amazon may top the company?s record breaking Christmas quarter, chief financial officer Joy Covey told investors in San Francisco on Monday.
She said the company was aiming for one thing in 1999: scale.
Amazon has seen annual sales balloon from $16 million in 1996 to $148 million in 1997 and $610 million in 1998. For the fourth quarter of 1998, Amazon posted record revenue of $253 million, setting the online retailer on a $1 billion revenue run rate. The company lost $22 million for the quarter.
Some analysts have been expecting online retailers to post disappointing first quarter sales after an unexpectedly strong fourth quarter.
?January sales are below December,? admitted Joy Covey, chief financial officer of Amazon, to an audience of investors at the Nationsbanc Montgomery Technology Week in San Francisco. But to the surprise of many in the audience, she added: ?There will be some sequential growth in the first quarter.?
Covey conceded that in the long term, the seasonal pattern of the retail business is likely to affect Amazon.
Covey said Amazon will increase its investments in staff, systems and brand marketing, in order to position itself for growth. ?We?ve been thinking too small here,? she said, ?It?s time to lay the foundation here for a multi-billion dollar store.?
?Scale is important. The bigger we are, the better we can do,? said Covey. She said the increased scale would bring down costs, giving the company an increasing edge over its smaller online competitors and creating better profit margins.
In January, Amazon announced a debt offering expected to boost the company?s cash reserve to over $1.5 billion.
Earlier this month, the company announced the creation of a new distribution centre in Nevada. Several additional distribution centers will be announced this year, said Covey. The distribution centres will be highly automated.
To drive growth, the company will also be expanding into sales of other product categories, as well as offering access to products sold by other online vendors.
?We want to be the ecommerce destination for our customers, whether we sell the product or not,? said Covey.
In the fourth quarter, the company?s recent ventures into music and video sales accounted for 25 per cent of sales, Covey said.
One thing that isn?t going to change anytime soon at Amazon, is profits. Or rather, the lack of them. Covey said book sales in the US were profitable for the fourth quarter. But gross margins on music and video sales are lower than in the book business, pushing down the company?s overall growth margins to 21.1 per cent in its latest quarter.
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