Amazon.com Announces Financial Results for Third Quarter 1999; Toys, Electronics, and zShops Make Amazon.com the One-Stop Destination for Holiday Shopping - Company Financial Information

Edge: Work-Group Computing Report, Nov 1, 1999

Having added a complete toy store, a complete electronics store, and zShops, Amazon.com, Inc. (Nasdaq:AMZN) Wednesday announced financial results for the third quarter of 1999.

Net sales for the third quarter were $356 million, an increase of 132 percent over net sales of $154 million for the third quarter of 1998.

Amazon.com reported a third-quarter pro forma operating loss of $79 million, compared to a pro forma operating loss of $21 million in the third quarter of 1998. Third-quarter pro forma net loss of $86 million, or $0.26 per share, compared with a pro forma net loss of $24 million, or $0.08 per share, in the third quarter of 1998. On a GAAP basis, reported third-quarter net loss was $197 million, or $0.59 per share, and included $111 million of merger-, acquisition-, investment-related costs, and stock-based compensation charges.

Amazon.com announced that cumulative customer accounts, including Auctions users, increased by 2.4 million during the third quarter to 13.1 million at September 30, 1999, an increase of more than 190 percent from 4.5 million customer accounts at September 30, 1998. Repeat customer orders represented more than 72 percent of orders during the quarter ended September 30, 1999, up from 70 percent in the previous quarter.

The growth in sales and customers accompanied the addition of a complete toy store, a complete electronics store, and the introduction of zShops to Amazon.com. zShops make it possible for any individual or business to sell through Amazon.com, reaching more than 13 million experienced online shoppers. Also, the company's new All Product Search helps shoppers find anything they want to buy on the Net, making Amazon.com the one destination for shoppers to find whatever they are looking for.

"In the third quarter, we announced our new Toys Store, which was immediately recognized by both Forrester Research and MSNBC as the best toy store on the Internet," said Jeff Bezos, Amazon.com founder and CEO. "Toys and our other product expansions round out our rich selection and establish Amazon.com as the one-stop holiday shopping destination."

Regarding Amazon.com's ongoing expansion, the company will be working hard during the holiday season to deliver the great service that Amazon.com customers have come to expect. The company has substantially increased its customer-service capability and increased distribution square footage more than four times compared to the 1998 holiday season, which will help the company better serve customers during this busy time. The company expects its combined focus on growth and customer satisfaction will impact fourth-quarter financial performance, relative to the third quarter, primarily in four ways: first, top-line revenues will increase significantly; second, gross margins will decrease; third, fulfillment expenses as a percentage of sales will slightly increase or be flat; and fourth, marketing expenses will increase.

Recent Highlights

Customer Experience

Heads-down focus on customers helped Amazon.com continue to improve customer experience and grow brand and reach. Recent highlights include Amazon.com rated as:

-- The most widely recognized e-commerce brand in the United States, as rated by online shoppers in a nationwide survey by Opinion Research Corp. Some 117.8 million adults, or 60 percent of the adult population in the U.S., recognize the Amazon.com brand, according to the survey;

-- The 57th most valuable brand worldwide, just above Hilton, Guinness, and Marriott, and just below Pampers, in a June study of global brands by Interbrand Newell and Sorrell;

-- The No 1. Toys store, Books, Music, and Video stores, and General Merchandise store in Forrester Research's recently released PowerRankings;

-- The best online toy store in an MSNBC survey, barely one month after the launch of the Amazon.com Toys Store, beating out longer-established players;

-- The No. 1 place to save money on the Internet, as rated by online shoppers in a nationwide survey by Opinion Research Corp.;

-- The No. 1 online shopping site and the No. 7 Web property during September, according to Media Metrix;

-- The No. 1 Video store, the No.1 Music store, and the No. 1 Bookstore by Gomez Advisors in their most recent scorecards of online stores in these categories;

-- The most-visited music store online, according to Greenfield Online's study of more than 5,000 consumers who have shopped for music online.

Wish List

In early October, Amazon.com introduced Wish List, an advanced and extensive online gift registry for the coming holiday season (http://www.amazon.com/wishlist). Designed to take the stress and hassle out of finding the perfect gift, Wish List was the No. 1 customer request during last year's holiday shopping season. Since its introduction, Wish List has seen faster adoption than almost any other feature Amazon.com has offered its customers.

zShops

In late September, Amazon.com introduced zShops, which enable anyone to offer merchandise for sale at Amazon.com, whether they are micro-manufacturers or major manufacturers, small businesses or global corporations, or specialized retailers. With zShops, anyone can now offer a vast array of popular or hard-to-find items to Amazon.com's more than 13 million customers.