Amazon stock climbed over 8% in after-hours trading, following the release of its financial results Thursday, beating analysts expectations with a net sales increase of 14% to $170 billion year over year.
That increase was 13% when not considering the favorable impact of exchange rates for the quarter, the retail giant said. North American segment sales were also up 13% year over year to $105.5 billion for the quarter ended Dec. 31.
Operating income increased $13.2 billion for the quarter, dwarfing the $2.7 billion reported in the fourth quarter of 2022. That figure was $6.5 billion for the North American segment of Amazon’s business, up from a loss of $200 million reported the same time last year.
Amazon CEO Andy Jassy said during the Q&A segment of the Thursday earnings call that he is “pleased with the progress we’re making” in the grocery segment of the business. That includes its Amazon Fresh locations, online sales of groceries through its web portal, and more than 500 Whole Foods Market locations.
“It’s a big business, and it’s continuing to grow at a very healthy clip, and we’re really pleased with that business. And it’s really the way that most mass merchandisers got into the grocery business a few decades ago,” he said.
He noted that the company began work last year remodeling select Amazon Fresh locations last year.
“If you want to serve as many grocery needs as we do, you have to have a mass physical presence, and that’s what we've been trying to do with (Amazon) Fresh over several years,” Jassy said. “We’ve been testing (version 2) of our Fresh format in a few locations near Chicago, and a few locations in Southern California.
“It’s very early, it’s just a few months in, but the results are very promising and on almost every dimension, and so we need to see it for a little bit longer time, but the results appear like we have something that’s resonating and if we continue to see that, then the issue becomes how fast and what’s the best way to expand.”
Jassy said Amazon would be able to leverage its various grocery outlets over time to make it easier for customers to shop between all three concepts. That means enabling shoppers to place an order and pick up multiple types of products, whether they’re from Amazon Fresh or Whole Foods, in one location.
Jassy was also bullish on progress the company has made in the health care field. “I really like the momentum we’re seeing in our Amazon Pharmacy business – it’s growing really quickly,” he said.
Could that mean pharmacies in Whole Foods Markets or Amazon Fresh stores in the future?
“If you think about what we do on the retail side, adding a pharmacy capability is a pretty natural extension,” he said. “It’s something that customers have asked us for, for many years, and it’s got more complexity to it than the rest of our retail business, so we had to think carefully about whether we wanted to pursue it.”
Pharmacy was one of the areas Amazon touted in its fourth quarter results, noting its partnership with One Medical, which enables members of Amazon Prime, the company’s premium service, to add health care from One Medical to their membership for $9 a month or $99 a year, which entitles them to primary care across the U.S.
Amazon also noted the success of its recent Black Friday and Cyber Monday holiday shopping events, which was the largest sale in the company’s history. U.S. customers ordered more than 500 million items from independent sellers. Worldwide, Amazon sold more than 1 billion items between the two events.
Amazon also took the opportunity to highlight the release of its new generative AI-powered shopping assistant known as Rufus.
“Rufus is an expert shopping assistant trained on Amazon’s product catalog and information from across the web to answer customer questions on shopping needs, products, and comparisons, make recommendations based on this context, and facilitate product discovery,” Amazon said in the earnings report. “Customers can simply start typing or speaking their questions into the search bar in the Amazon Shopping app, or choose from a set of pre-populated questions, and Amazon will provide answers via a chat dialog box to help customers make more informed purchase decisions. Rufus launched in beta to a small subset of customers and will progressively roll out to the rest of Amazon’s U.S. customers in the coming weeks.”