Amazon’s record sales prompt more high street fears

The online giant continues to lure shoppers away from the high street, raising more fears for traditional retailers.

Online retail giant Amazon has revealed record sales in the last three months of 2012, reinforcing concerns for the future of high street shopping.

The Seattle-based firm said international sales, including the UK, spiked 20% to $9.09bn (£5.7bn). The global boost pushed the company's total Q4 net sales to $21.3bn (£13.5bn), up 22% from the previous year.

The company said operating income jumped 56% to $405m (£257m) in the fourth quarter, compared with $260m (£165m) in the same period of 2011.

Operating profit in the US was above forecasts, pushed by growth in its third party selling using its distribution centres.

The Kindle Fire HD has become the key sales product for the company and although it is sold slightly above cost the digital content provides the profit stream.

Amazon's share price hit a new record high after the company reported the better-than-expected quarterly profits.

The climb in revenue still missed Wall Street's expectations - but investors sent the share price for the world's biggest online retailer up by more than 10% to $288 (£182) in after-hours trading.

Profits have shrunk in recent years as the company invested in its distribution network and its Kindle business as part of a long-term growth plan.

Amazon mainly operates as a retailer, buying products at wholesale prices, storing them and then selling at a slight mark-up to consumers online - a low-margin business.

The model has been embraced by consumers, with knock-on effects that have exacerbated the high street's health.

This year alone, Blockbuster, HMV and Jessops have called in administrators.

US multinationals have come under increasing scrutiny over their complicated tax minimisation structures.

MPs grilled top executives of Google, Starbucks and Amazon last year over the arrangements.

Amazon director of public policy Andrew Cecil was forced to explain why a CD or a book bought in pounds on Amazon.co.uk delivered from a UK warehouse by the Royal Mail is registered in Luxembourg.

Earlier in 2012 it was reported that Amazon generated UK sales over the past three years of between £7.6bn and £10.3bn but paid virtually no corporation tax.

Further fears have been raised about Amazon's ongoing strategy as it expands into other businesses that are potentially more profitable, including cloud computing, digital content and acting as an online marketplace for other sellers.

These newer businesses are growing faster than the company's original retail operations, further boosting profitability.

Founder and chief executive Jeff Bezos said: "We're now seeing the transition we've been expecting.

"After five years, eBooks is a multi-billion dollar category for us and growing fast - up approximately 70% last year."

For the current quarter, Amazon expects revenue of $15bn (£9.5bn) to $16.6bn (£10.5bn). Analysts had expected revenue of $16.86bn.

Source : Sky News
http://news.sky.com/story/1044765/amazon-success-prompts-more-high-street-fears