Amazon International Unit Shows First-Quarter Loss On China Spending

Online retail giant Amazon reported a sharp 32 percent rise in profits to $108 million (£64m) for the first quarter of 2014, aided by strong sales, but it disappointed investors with rising expenses as it invests in new services and expansion in China.

The growth in profits was backed by sales that grew by 23 percent to $19.74 billion for the quarter. However, a 23 percent year-on-year rise in expenses, including capital spending on warehouses and efforts to broaden its product selection in China while keeping prices low, meant that the company’s international division recorded a quarterly operating loss of $60 million.

“2014 is off to a kinetic start,” said the company’s founder and chief executive, Jeff Bezos.

Sales growth

Amazon is investing heavily in new devices and services as its core retail business faces increased pressure. The company has moved into streaming video with the launch of its Fire TV set-top box, which includes programming from HBO, and Bezos said the company is having trouble keeping the device in stock.

Amazon is also developing its own content, including television programming and video games, has added services such as a food-delivery programme, and is rumoured to be planning a smartphone.

Other spending included building more warehouses and expansion of the Amazon Web Services cloud offering.

Fulfilment costs rose by 29 percent while technology and and content spending rose by 44 percent.

Chinese competition

Amazon has invested heavily in China for nearly a decade, and that investment has increased in recent years, targeting areas including pricing, service levels and stock availability, according to the company. However, so far Amazon’s market share is thought to lag far beyond that of rivals such as 360 buy and Alibaba, which is planning what could be the largest-ever initial public offering for a technology company.

Amazon said it has also been spending heavily in Italy and Spain, which represent new markets for the company. The international business had reported a profit in the previous quarter.

Meanwhile, the North American unit showed operating income of $562 million. Amazon said in March it would increase the cost of its Prime unlimited shipping membership in the US by 25 percent from $79 per year to $99 per year, adding perks such as television programming to help head off defections.

Shares of the company fell by 0.2 percent in after-hours trading. Its shares have declined by more than 15 percent this year.

Do you know all about the Internet of Things? Take our quiz.