Shares rose as much as 17 per cent in extended trade
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A worker assembles a box for delivery at the Amazon fulfillment center in Baltimore, Maryland. Photo by REUTERS/Clodagh Kilcoyne/File Photo Amazon.com Inc on Thursday said it was raising the price of its Prime subscriptions, as it looks to offset higher shipping costs and wages even after beating profit expectations for the holiday quarter.
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Shares rose as much as 17 per cent in extended trade, after dropping nearly eight per cent before the market’s close as part of a broader technology stock sell-off. If shares rise on Friday by that much, it would be the stock’s biggest percentage gain since October 2009.
For the holiday quarter, Amazon earned US$14.3 billion, double its net income from a year earlier. That included a pre-tax gain of US$11.8 billion from its stake in electric car maker Rivian Automotive.
On the heels of a windfall from greater at-home shopping in the pandemic, Amazon has poured money into its operations to manage disruptions, most recently the Omicron variant of COVID-19. It has marketed signing bonuses to attract hundreds of thousands of workers in a tight labor market, and it has paid more for shipping because it could not get products into the right warehouses.
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Now, it is raising the U.S. monthly fee of Prime, its fast-shipping and media subscription, to US$14.99 from US$12.99, with annual membership increasing to US$139 from US$119. The change is effective Feb. 18 for new members, it said.
U.S. subscribers’ annual fees last went up four years ago to US$119 from US$99, and they went up four years prior. Analysts have said it was time And it has more than 200 million paid subscribers to its loyalty club Prime to whom to appeal for an increase to cover the company’s increased costs. The company had no change to announce for Prime members outside the United States.
Chief Financial Officer Brian Olsavsky told reporters on a conference call that Amazon expected some Prime members to quit, but retention loss “hasn’t been large in the past.”
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Revenue per Prime member “did grow significantly during the pandemic,” he added.
With more than 200 million members globally, Prime is an incentive to consumers to direct more of their shopping to Amazon so they can make the most of their subscriptions. Such fees for the fourth quarter alone rose 15 per cent to US$8.1 billion.
More On This Topic David Rosenberg: The outlook for Canada’s provinces? Head for the coasts Emerging ESG bond boom puts world on path to sell US$1.8 trillion Volatility rages in uranium stocks as clean tech takes a beating Amazon Web Services (AWS) performed well. The cloud computing division has booked more sales with demand rising for gaming and remote work, increasing revenue 40 per cent to US$17.8 billion. Analysts had expected more than US$17.3 billion, according to IBES data from Refinitiv.
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Article content The unit even won a key customer, announcing Thursday an expanded partnership with retailer Best Buy Co Inc. AWS has long sought rivals as its marquee clients, such as Netflix Inc, to show it is a trustworthy partner and not scooping up competitors’ data. Microsoft Corp and Alphabet Inc’s Google recently forecast a positive outlook or results for their cloud businesses as well.
And Amazon broke out ad revenue for the first time, reporting a 32 per cent increase to US$9.7 billion for the fourth quarter. That’s bigger than the ad sales Alphabets’s YouTube reported for the same period.
Still, Amazon forecast first-quarter sales below Wall Street estimates, projecting between US$112 billion and US$117 billion, or to grow between three per cent and eight per cent.
Analysts were expecting US$120.04 billion, according to IBES data from Refinitiv.
© Thomson Reuters 2021
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