Amazon’s net sales and earnings continued to soar in the first quarter, although the e-commerce giant reported increased costs as it grew its fulfillment operations.
For the first quarter ended March 31, Amazon.com posted a net income increase, based largely on lower income taxes, to $724 million, or $1.48 per diluted share, versus $513 million, or $1.07 per diluted share, in the 2016 period.
Amazon surpassed an analyst average estimate of $1.03 per diluted share published by MarketBeat.
Higher costs including those for fulfillment, technology and marketing, hit operating income, which fell to $1.01 billion from $1.07 billion in the fiscal year-earlier period. Net sales increased to $35.71 billion from $29.13 billion as product sales advanced to $23.73 billion from $20.58 billion in the previous first quarter.
Brian Olsavsky, Amazon’s CFO, addressed increased costs in the company’s first quarter conference call, noting that much of the expenditure was a consequence of the company’s growth. He pointed out that capital expenditure costs, up 51% year-over-year, arose principally from fulfillment operations including the addition of 26 fulfillment centers last year, with 23 coming on line in the second half of the year. Some start-up costs fell into the first quarter results this year, he said. Also having an effect was the differential between Amazon fulfilled network unit growth and paid unit growth. The 40% growth rate for Amazon fulfilled units last year came in higher than the paid unit growth. In addition, he said, robotics technology Amazon has deployed in new fulfillment centers tends to make them more capital intensive in development than has been the case in the past, although the additional cash spend can be recouped in operating efficiencies and variable costs following start-up.