SEATTLE-Substantial increases in expenses offset a significant gain in sales to send Amazon.com’s net loss to $126 million in its fiscal second quarter, compared to a net loss of $7 million in the second quarter of last year.
Total operating expenses jumped 23.9 percent in dollars and 57 basis points as a percentage of sales, to 100.1 percent. Gross margin fell 210 basis points to 69.3 percent. Interest expense rose 36.4 percent, and Amazon increased its provision for income taxes to $94 million from $13 million in last year’s second quarter.
Net sales in the quarter, which ended on June 30, totaled $19.3 billion, up 23.3 percent. This included a 19.6 percent gain in product sales.
Jeff Bezos, Amazon’s founder and CEO, said of the quarter, “We continue working hard on making the Amazon customer experience better and better.” Among a spate of Amazon introductions, Bezos cited Sunday delivery coverage to 25 percent of the U.S. population, European cross-border two-day delivery for Prime, Prime Music with more than 1 million songs, three original kids’ TV series, parental controls to Fire TV with FreeTime and Kindle Unlimited, an e-book subscription service. He also mentioned a roster of debuts for Amazon Web Service customers and noted that today, U.S. customers will begin receiving their Fire phones, its first smart phones.
For the third quarter, Amazon said it expects net sales to total between $19.7 billion and $21.5 billion, or 15 to 26 percent ahead of last year’s third quarter. Its operating loss should be between $410 million and $810 million, compared to an operating loss of $25 million for the third quarter of 2013.