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Amazon’s physical stores eke out Q2 sales gain

Strong growth continues for online retail business Inc. saw virtually flat sales at its physical stores in the second quarter despite robust growth in online retail and overall company sales.

Reporting results after yesterday’s market close, Amazon said sales at physical stores totaled $4.33 billion for the quarter ended June 30, up 0.4% from $4.31 billion a year earlier. Excluding the impact of foreign exchange rates, sales rose 1%, the Seattle-based company said. Sequentially, physical-store sales gained 0.5% from just under $4.31 billion in the 2019 first quarter.

Amazon’s physical-store sales come mainly from its Whole Foods Market unit and exclude online orders made via its brick-and-mortar brands, such as Prime Now delivery and pickup through Whole Foods stores. Currently, the e-tail giant’s U.S. physical stores include 481 Whole Foods Markets, 13 Amazon Go convenience stores, 18 Amazon Books stores, three Amazon 4-Star outlets and four Presented by Amazon outlets. The company doesn’t break out sales totals for its brick-and-mortar retail segments.

Online store sales came in at $31.05 billion in the second quarter, a 14% gain from $27.17 billion a year ago. Year-over-year growth was 16% excluding foreign exchange.

Amazon’s overall second-quarter net sales jumped 20% to $63.4 billion from $52.89 billion in the 2018 quarter. The company said net sales climbed 21% excluding an $814 million negative impact from changes in foreign exchange rates.

Operating income rose 3.3% to $3.1 billion in the 2019 second quarter. Net income totaled $2.63 billion, or $5.22 per diluted share, compared with net income of $2.53 billion, or $5.07 per diluted share, a year earlier.

Analysts, on average, had forecast net earnings per share of $5.57, with estimates ranging from a low of $4.34 to a high of $7.85, according to Refinitiv/Thomson Reuters.

“Customers are responding to Prime’s move to one-day delivery. We’ve received a lot of positive feedback and seen accelerating sales growth,” Amazon CEO and founder Jeff Bezos said in a statement. “Free one-day delivery is now available to Prime members on more than 10 million items, and we’re just getting started. A big thank you to the team for continuing to make life easier for customers.”

In a conference call late yesterday, Chief Financial Officer Brian Olsavsky noted that while one-day shipping is a key investment focus for Amazon, the company is spending on other areas to fuel expansion.

“We certainly have a lot of areas where we continue to invest, not the least of which is our AWS [Amazon Web Services] business, devices, video, the global expansion of a lot of our Prime benefits, and things like stores and grocery delivery through Whole Foods, Prime Now and AmazonFresh.”

On the grocery retail side during the quarter, Amazon expanded Prime Now same-day delivery to Whole Foods stores in about two dozen new markets. The service is now available in 88 metropolitan areas in the U.S. Also, the company expanded AmazonFresh perishables same-day delivery to Las Vegas, extending the service’s reach to 15 major markets. Items ordered through AmazonFresh are delivered from Amazon fulfillment centers.

Also, two Amazon Go stores were opened in Manhattan. The cashierless concept now has 13 locations in Seattle, Chicago, San Francisco and New York, with another four in the works.

The second quarter also saw the opening of Whole Foods’ 500th store, a midtown Atlanta location that will serve as the flagship for the Southern region. The four-story location contains four eateries. Overall, Whole Foods now has 502 stores, including 14 in Canada and seven in the United Kingdom.

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