Amazon_lockers.jpg Georg Beyer
Amazon lockers in Union Station store in Denver.

Amazon's Whole Foods revenue 'slightly better' than expected

Amazon reports record Q4 sales Inc. wowed Wall Street with a record $60.5 billion in sales — an increase of 38% — for its fourth quarter, ended Dec. 31, 2017. Excluding the $1.1 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 36% compared with the fourth quarter of 2016.

Net sales for the full year increased 31% to $177.9 billion, compared with $136 billion in 2016.

For the quarter, operating income increased 69% to $2.1 billion, compared to $1.3 billion for the fourth quarter of 2016. However, for the full year operating income decreased 2% to $4.1 billion, compared to $4.2 billion in 2016.

In an earnings conference call with securities analysts, company officials said they were pleased with the performance of Whole Foods, which Amazon acquired last summer.

“We’re continuing to be very excited about the opportunities we have to innovate with the Whole Foods and Amazon teams together,” said Brian T. Olsavsky, CFO and senior vice president at He noted that fourth-quarter physical store revenue at Amazon — primarily comprised of Whole Foods — was $4.5 billion. “That was slightly better than what was built into our guidance,” he said.

“So far, our focus has been on continuing to lower prices even beyond the initial ones that we discussed at the close of the deal in late August,” he said, referencing price cuts on items including salmon and cage-free eggs. “We’ve launched Whole Foods products on our Amazon website and the technical work continues to make Prime the Whole Foods customer rewards program, and we expect to have more on that later in the year. We’ve also added lockers, and [have] much more to come. So we’re very happy with the initial results out of the team in Whole Foods down in Austin.”

However, Whole Foods did post a “small operating loss” for the quarter, Olsavsky said. “At the time of the acquisition, we had stepped up the fair market value of certain assets on the balance sheet. That is going to increase the amortization,” he said.

Amazon’s net income was $1.9 billion for the fourth quarter, or $3.75 per diluted share, compared with net income of $749 million, or $1.54 per diluted share, in the fourth quarter of 2016. The fourth quarter of 2017 includes a provisional tax benefit for the impact of the U.S. Tax Cuts and Jobs Act of 2017 of approximately $789 million. For the full year, net income was $3.0 billion, or $6.15 per diluted share, compared with net income of $2.4 billion, or $4.90 per diluted share, in 2016.

Company officials attributed much of the increase to the growing popularity of Amazon’s Alexa cloud-based voice service.

“Our 2017 projections for Alexa were very optimistic, and we far exceeded them,” said Jeff Bezos, founder and CEO of Seattle-based Amazon. “We don’t see positive surprises of this magnitude very often — expect us to double down. We’ve reached an important point where other companies and developers are accelerating adoption of Alexa. There are now over 30,000 skills from outside developers, customers can control more than 4,000 smarthome devices from 1,200 unique brands with Alexa, and we’re seeing strong response to our new far-field voice kit for manufacturers. Much more to come and a huge thank you to our customers and partners.” 

During the conference call, Dave Fildes, director of investor relations at, noted that consumers continue to flock to Amazon’s Prime membership. “We continue to see sign-ups for memberships at a strong clip,” he said.

Amazon is stressing groceries and consumables as a result of the Whole Foods acquisition, Olsavsky said. “We continue to look at our whole offering of AmazonFresh, Prime Now, Whole Foods, how can they work together to create better and better offerings for our customer base,” he said. “To a lesser extent, versus grocery, I would say we continue to build our B2B businesses and are very happy with the initial performance there with a number of the companies and universities that we’ve been working with and their initial results.”

When asked about reports about out-of-stock issues at Whole Foods since Amazon took over, Olsavsky said, “We’ve made no changes post-acquisition that would have impacted anything related to in-stock, except perhaps the fact that the price decreases have brought up demand and there’s an amount of rebalancing related to that.”

Weather-related issues may also be a factor, he said. “But stepping beyond any short-term issues, the commitment remains to have healthy, high-quality selection in-stock for products. That’s what the Whole Foods team is committed to. That’s what the Amazon team, with them, is committed to, and also across any delivery channel that we have — AmazonFresh, Prime Now or Whole Foods,” Olsavsky sa

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