First Call consensus expected the online retailer to lose 48 cents a share, but many analysts were projecting a loss of between 53 cents and 58 cents a share due to a series of inventory writedowns.
In the quarter, Amazon.com took a US$39 million charge for inventory reductions. On an operating basis, Amazon.com lost US$175 million in the quarter.
Despite missing the consensus estimate, Amazon.com enjoyed a solid quarter in several key areas.
The US$676 million in sales represents a 167 percent improvement from the year-ago quarter when it lost US$22 million, or 17 cents a share, on sales of US$253 million.
Earlier this quarter, Amazon.com predicted it would record total sales of roughly US$650 million.
In the quarter, its cumulative customer accounts grew by 3.8 million to more than 16.9 million. More impressive, repeat customers accounted for 73 percent of all orders in the quarter.
Company officials credited strong electronics and auction sales for the top-line surprise.
"This was our fastest sequential growth as a public company, and we are grateful that so many customers chose Amazon.com for such a broad range of products," said Amazon.com founder and CEO Jeff Bezos in a prepared release. "We did a good job delivering for customers this holiday."
Clearly, Amazon.com's philosophy of foregoing profitability for the foreseeable future and increasing expenses to provide top-notch customer service has rankled some analysts.
But Amazon.com's shares jumped to 77 in after-hours trading after closing up 2 to 69 7/16 in the regular session.
Predictably, the company's fulfillment expenses were 16 percent of its total sales, up 10 percent from the year-ago quarter.
Sales, customer accounts higher than expected
Merrill Lynch analyst Henry Blodget, who at times has been Amazon.com's biggest cheerleader and its most outspoken critic, predicted a gain of between 3.3 million to 3.5 million customer accounts in the quarter, which would have been an 18 percent improvement from his original estimate.
Blodget pegged Amazon.com for a loss of 49 cents a share on sales of US$650 million.
"During its preannouncement, Amazon said it will not meet consensus bottom line estimates primarily due to inventory writedowns," Blodget said in a research report this week. "We believe EPS would have roughly met published estimates prior to increased inventory write-down expense. We remain confident with our outlook for improved margins in 2000."
Of course, Wall Street will be more interested in the company's outlook for 2000 and, specifically, its plans to lower expenses for the purpose of eventually turning a profit.
Bezos uses the "P" word
Amazon.com broke with tradition on a conference call Wednesday as officials used the "P" word -- profits.
Officials allayed Wall Street fears and provided what appeared to be a road map to eventual profits.
Chief financial officer Warren Jenson said the fourth-quarter operating loss was at the high point and would come down throughout 2000.
"We have reached a tipping point in the business," said CEO Jeff Bezos, who actually mentioned profits. Bezos cited six goals: boost customer count, pursue operational excellence, continue to expand, expand internationally, partner with other e-tailers, and "drive toward profitability in each and every business we're in."
Bezos said margins would improve substantially.
"Our investment curve should be less steep and our time to profitability should be shorter," he said. "We expect overall losses to decrease."
Amazon received 73 percent of its fourth-quarter sales from repeat orders and only spent US$19 to acquire a new customer.
Jenson divided Amazon's businesses into groups. In the fourth quarter, operating losses for its retail business (books, music, toys etc.) were 20 percent of sales. A year from now, Jenson said operating losses would be 5 percent of sales, including any new retail stores.
"In 2000, we will reap the benefits of scale," said Jenson, who said gross margins would approach 20 percent in the first quarter and could improve throughout the year. Gross margins in the fourth quarter fell to 13 percent from 19.8 percent in the third quarter.
Officials said its book business showed the benefit of scale, but didn't detail the exact profits.
Jenson said he expected strong growth in 2000, but sales would slip sequentially in the first quarter. However, first-quarter sales would be "up strongly year over year."
In December, the site's reach climbed to 25.6 percent and unique visitors jumped to 15.9 million, according to Media Metrix.
Company officials said it was able to ship 99 percent of holiday orders, peaking with more than $16 million in shipments in a single day.
Sales per customer who purchased in 1999 were US$116, up from US$106 for 1998.
It's not just books anymore
While U.S. sales of books improved 66 percent to US$317 million from the year-ago period, those sales accounted for less than 50 percent of the company's total sales.
Its music sales soared to $78 million in the quarter, up 136 percent from the year-ago quarter. DVD and video sales were up more than 500 percent from the same time last year to more than US$64 million.
Its toy and children's product sales were US$95 million in the quarter, which looks impressive on its own but not so imposing considering eToys Inc. recorded sales of more than US$107 million in the same period.
Sales from its electronics, home improvement and auction services business checked in at roughly US$51 million in the quarter.
Plenty going on
Amazon has had a busy month. First, the company preannounced sales of US$650 million for the quarter. After investors and some analysts panned the stock for its profit outlook, Amazon detailed a barrage of strategic pacts that led many analysts to change their tune about the stock.
The company also inked a broad pact with Drugstore.com and Greenlight.com.
Last week, it said it was laying off 150 employees.
On Monday, Amazon said it bought a stake in Audible in a deal where Audible will give the online retailer US$30 million over three years.
One day later, Amazon bought a stake in Living.com in exchange for promotion.
Last quarter, Amazon.com lost US$86 million, or 26 cents a share, on sales of US$356 million.
Its shares peaked at 113 in December after falling to a low of 41 in August.
Twenty-one of the 30 analysts tracking the stock maintain either a "buy" or "strong buy" recommendation.
First Call consensus expects Amazon.com to lose US$1.16 a share in fiscal 2000.
