Amazon finishes strong fiscal year with lackluster physical-store sales

Amazon saw no sales growth at physical stores for its fiscal 2019 fourth quarter and full year despite overall sales gains of at least 20% for both periods.

For the quarter ended Dec. 31, physical store sales came in at $4.36 billion, down 0.9% from $4.4 billion a year earlier, Amazon said yesterday after the market close. On a sequential basis, physical-store sales climbed 4.1% from $4.19 billion in the third quarter, when sales declined 1.3% year over year.

Fiscal 2019 physical-store sales totaled $17.19 billion, dipping 0.2% from $17.22 billion in fiscal 2018.

Amazon’s physical-store sales come mainly from its Whole Foods Market unit and exclude online orders made through its brick-and-mortar brands, such as Prime Now delivery and pickup via Whole Foods stores.

Currently, Amazon’s U.S. physical stores include 487 Whole Foods Markets (508 including Canada and the United Kingdom), 25 Amazon Go cashierless convenience stores, 21 Amazon Books stores, nine Amazon 4-Star outlets and five Presented by Amazon locations. The Seattle-based company doesn’t break out sales totals for its brick-and-mortar retail segments.

Online store sales for Amazon, meanwhile, surged 14.7% in the 2019 fourth quarter to $45.66 billion from $39.082 billion a year ago. For the full year, online store sales were $141.25 billion, up 14.8% from $122.99 billion in 2018.

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In a conference call yesterday on fiscal 2019 results, Chief Financial Officer Brian Olsavsky told analysts that Amazon has seen a big boost in online grocery delivery since making its AmazonFresh perishables-focused delivery service a free benefit under the Prime program. The move, announced in late October, essentially made free grocery delivery part of the Prime benefits package for orders of at least $35. Prime Now also includes delivery and pickup from Whole Foods stores in select areas.

“Early results are good. Our grocery delivery orders from the combination of AmazonFresh and Whole Foods Market more than doubled in the fourth quarter year-over-year. So we believe customers are starting to notice and take advantage of this,” Olsavsky said in the call.

“We will see where people's tastes and preferences will take them, whether they go to the Whole Foods Market store, whether they use Prime Now or Amazon delivery for their groceries,” he added. “Right now, we're really just testing and reacting to the customer demand and customers' preferences, and we'll do so for the foreseeable future.”

Prime Now delivery via Whole Foods is now available in nearly 90 major U.S. markets, and Prime Now Pickup is offered in 30 metropolitan areas. AmazonFresh serves 19 metro markets.

Related:Amazon ups online grocery ante with free AmazonFresh

Companywide, Amazon tallied fourth-quarter 2019 net sales of $87.44 billion, up 21% from $72.38 billion a year ago. Total fiscal 2019 net sales came in at $280.52 billion, a gain of 20% from $232.89 in fiscal 2018.

“Prime membership continues to get better for customers year after year. And customers are responding — more people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,” said Jeff Bezos, Amazon founder and CEO. “We’ve made Prime delivery faster — the number of items delivered to U.S. customers with Prime’s free one-day and same-day delivery more than quadrupled this quarter compared to last year. Members now have free two-hour grocery delivery from Amazon Fresh and Whole Foods Market in more than 2,000 U.S. cities and towns.

Operating income rose 2.5% to $3.88 billion in the fourth quarter from $3.79 billion in the prior-year period. For the full year, operating income was $14.54 billion, up 17.2% from $12.42 in fiscal 2018.

Amazon reported fourth-quarter net income of $3.27 billion, or $6.47 per diluted share, compared with $3.03 billion, or $6.04 per diluted share, a year earlier. On average, analysts had projected net earnings per share of $4.03, with estimates ranging from a low of $2.19 to a high of $5.58, according to Refinitiv/Thomson Reuters.

Fiscal 2019 net earnings were $11.56 billion, or $23.01 per diluted share, versus $10.07 billion, or $20.14 per diluted share, in 2018. Analysts’ consensus estimate was for full-year EPS of $20.65, with projections running from a low of $18.72 to a high of $22.72.