Last updated: July 24, 2009 12:57 am

Electronics drive growth at Amazon

Amazon, the world’s largest internet retailer, saw its sales increase 14 per cent to $4.65bn during its second quarter, as online demand for its goods continued to outstrip the moribund traditional retail sector.

The company’s North American sales rose 13 per cent to $2.45bn, while international sales in the UK, France, Germany, Japan and China rose 16 per cent to $2.2bn.

The sales growth was driven by a 35 per cent increase in consumer electronics and other general merchandise sales, rather than the books and media sales upon which the internet retailer built its reputation.

Amazon highlighted the stronger performance of its business with third-party sellers, who pay a commission to advertise on Amazon’s site, and where it competes directly with Ebay.

It said the sellers shipped 30 per cent more units than during the second quarter last year, while the number of sellers grew 21 per cent, which Tom Szkutak, Amazon’s chief financial officer, said was “the fastest growth rate we’ve seen in many quarters”.

Amazon does not break out its earnings from its third party business.

The group said it had also seen the number of sellers using its fulfilment service, under which it stores and ships goods from its warehouses, more than triple during the quarter against a year ago, and that the service had shipped more items in the year so far than in the whole of 2008.

Amazon’s shares fell by more than 6 per cent in after hours trading to $87.55, having gained more than 5 per cent during trading before the results.

The company said on Wednesday that it planned to acquire Zappos, the largest US online shoe retailer, in a mostly stock deal valued at more than $900m. The deal would be its largest acquisition to date. Mr Szkutak said on Thursday that Zappos had approximately $635m of revenue last year and made “a small profit”.

He said Amazon expected to continue to run Zappos alongside its existing Endless.com shoes website, comparing it to its 2006 acquisition of Shopbop, a small fashion retailer.

“This is not about [cost cutting] synergies; this is about growing in categories that we think are very interesting.”

Amazon’s earnings fell 10 per cent to $142m, or 32 cents per diluted share, against last year, hit by a $51m payment in a legal settlement to Toys R Us. The corresponding quarter a year ago also benefited from a $53m non-cash gain. It forecast that its third-quarter sales would grow in the range of 11 per cent to 23 per cent, to $4.75bn-$5.25bn.

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