Amazon’s shares soared by more than 11% in after hours trading on Thursday when the company exceeded analysts’ expectations by recording sales of $89bn last year.
The company, which started life in founder Jeff Bezos’s Seattle garage 11 years ago, said its 2014 full-year sales increased by 19.6% compared with the previous year.
Despite raking in more money than the GDP of Oman, Azerbaijan or Belarus, Amazon recorded a full-year loss of $241m. The loss was caused by Amazon’s massive investment in its expansion plans including making its own programmes and building new warehouses and server farms. Its massive spending spree – of $28.7bn in the last three months of 2014 alone – also allows the company to pay minimal tax. Amazon paid just $177m in income tax.
Amazon’s tax affairs have attracted significant controversy. Last week, European competition regulators attacked Amazon for paying too little tax in Europe by funnelling sales through Luxembourg. A 23-page provisional decision paper from the competition commission in Brussels said Amazon EU Sarl, the group’s Luxembourg trading hub with sales of €13.6bn (£10.3bn) in 2013, had been paying inflated royalty fees to another Amazon entity.
Amazon’s British business paid just £4.2m in tax in 2013, despite selling goods worth £4.3bn.
Bezos, who is the world’s 17th richest man, with an estimated fortune of $28.9bn, according to Forbes, said Amazon’s sales success was largely due to its decision to increase the price of its Prime membership service.
“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping,” Bezos said, referring to Amazon’s decision to hike the annual cost of its Prime service from $79 to $99 a year. “The data is in, and customers agree: on a base of tens of millions, worldwide paid membership grew 53% last year – 50% in the US and even a bit faster outside the US. Prime is a one-of-a-kind, all-you-can-eat, physical-digital hybrid; in 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video. We’ll continue to work hard for our Prime members.”
Amazon Prime membership rose 53% in 2014 worldwide, and 50% in the US market.
This article was written by Rupert Neate in New York, for theguardian.com on Thursday 29th January 2015 23.14 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010