Amazon 2017 Sales Increase by a Third

Amazon 2017 Sales Increase by a Third
Online retailer Amazon saw sales jump by nearly a third last year, helped by growth in its Prime delivery service. Full-year revenue came in at $177.9bn (£124.6bn), a rise of 31%, while profit hit $3bn, against $2.4bn in 2016. The company reported record sales in the final three months of the year, driven by a surge in online shopping over the holiday season and demand for its cloud services.

Shares in Amazon rose by 6% in after-hours trading. The company said more than five billion items were sent using its Prime shipping service worldwide in 2017. It added that more “new paid” members joined the scheme than in any previous year, both worldwide and in the US. More than four million people signed up in one week alone last quarter Amazon said. Prime members have access to fast shipping, exclusive TV shows on Amazon Prime Video and extra benefits when using the company’s voice-controlled Alexa digital assistant.

Amazon has focused on boosting Prime subscribers, which its chief financial officer has previously called its “most important customer base”. Prime subscribers tend to do more shopping with the company, although Amazon has not said how many people it has signed up so far.

The company’s boss Jeff Bezos said projections for its Alexa assistant had been very optimistic and the company had “far exceeded them. We don’t see positive surprises of this magnitude very often – expect us to double down.”

The company said fourth-quarter sales rose by 38% to hit a quarterly record of $60.5bn (£42.4bn). Fourth-quarter profits more than doubled to $1.9bn against $749m in the last three months of 2016.

The figures were boosted by a tax benefit of about $789m related to the new US tax law.

The results also include the contribution from the Whole Foods grocery store chain, which Amazon bought last year. “This was another blow-out quarter for Amazon,” said analyst Daniel Ives of GBH Insights. “The retail strength was eye-popping as the company had a banner holiday season and looked to capture roughly 50% of all e-commerce holiday season sales.”

 

Amazon Receives 200 Plus Headquarters Proposals

Amazon Receives 200 Plus Headquarters Proposals
Amazon says it has now received 238 proposals from places vying to be the home of its next employment hub. The bids come after the e-commerce giant said it was looking to build a “second headquarters” in North America, where it would invest $5bn (£3.8bn) and hire as many as 50,000 people.

The locations are vying on factors such as workforce talent, tax breaks, and proximity to an international airport.

Amazon said it will decide on a location next year. Amazon has seen major growth. The firm had nearly $136bn in sales last year and employs about 380,000 people globally – adding about 39,000 since the start of 2017 alone.

Politicians are eager to attract the economic engine to their home towns.

The proposals come from all but seven US states, most southern provinces in Canada and three states in Mexico, as well as Washington DC and the territory of Puerto Rico, according to a map published by the company. The places competing include sites in Baltimore, Boston, Chicago, Detroit, Newark and Toronto.

Amazon’s UK Tax Bill Dropped by 50%

Amazon’s UK Tax Bill Dropped by 50%
Amazon has seen a 50% fall in the amount of UK corporation tax it paid last year, while recording a 54% increase in turnover for the same period. This snippet of news raised eyebrows this morning when it was revealed. So what’s going on?

The answer is simple on the face of it. Taxes are paid on profit not turnover. It paid lower taxes because it made lower profits. Last year it made £48m in profit – this year it made only £24m so it paid £7m tax compared to £15m. What is more interesting is WHY its profits were lower.

Part of the reason is the way it pays its staff. Amazon UK Services is the division which runs the fulfilment centres which process, package and post deliveries to UK customers. It employs about 16,000 of the 24,000 people Amazon have in the UK. Each full-time employee gets given at least £1,000 worth of shares every year. They can’t cash them in immediately – they have to hold them for a period of between one and three years.

If Amazon’s share price goes up in that time, those shares are worth more. Amazon’s share price has indeed gone up over the past couple of years – a lot. In fact, in the past two years the share price has nearly doubled, so £1,000 in shares granted in August 2015 are now worth nearly £2,000. Staff compensation goes up, compensation is an expense, expenses can be deducted from revenue – so profits are lower and so are the taxes on those profits.

But surely this extra income for the staff is taxed? Probably not.

HMRC rules allow employees to receive £3,600 worth of shares from their employer tax free every year. Most of these awards are below that threshold.

The employee wins through a tax-free windfall, Amazon wins because it hasn’t got to pay any cash out, which leaves HMRC as the big loser. This is not just allowed by UK tax law – it is required by it. So, weirdly, the more valuable Amazon becomes, the less tax this particular bit of its business pays.

There is heightened sensitivity around the tax affairs of technology giants such as Amazon, Google and Apple. The challenge of adapting a tax code written for a bygone era to work effectively on technology multinationals who have socked billions away in low tax jurisdictions remains. But the practice of giving staff shares is widespread, generally seen as a good way to promote loyalty and engagement – and is 100% legal.

Amazon Data Centre Fault Knocks Websites Offline

Amazon Data Centre Fault Knocks Websites Offline
Several high-profile websites and services were knocked offline by a failure at one of Amazon’s major US data centres. Amazon Web Services (AWS) allows firms to rent cloud servers in order to host data on the internet without needing to invest in their own infrastructure.

On Tuesday, sites such as Quora, a Q&A forum, and Trello, which helps people monitor productivity, went down. After several hours, Amazon said it had rectified the problem. It did not make public the reason behind the disruption.

As well as sites that went down, other services, such as workplace collaboration tool Slack, also lost some key functionality. Specifically, it was AWS’s S3 – which stands for Simple Storage Service – that was affected. To varying degrees it serves around 150,000 sites and services around the world, mostly in the US.

AWS is used by some of the web’s most recognisable and powerful names including Netflix, Spotify and Airbnb. While none of those services went offline on Tuesday, users did report performance issues and slowdown.

US government services such as the Securities and Exchange Commission (SEC) were also affected.

Downtime is a critical issue for any cloud service. Amazon competes with Google, Microsoft and others for what is an increasingly lucrative line of business for the web giants.

Shoppers Frustrated on Amazon Prime Day

Shoppers Frustrated on Amazon Prime Day
US-based Amazon customers are reporting problems completing online purchases on Prime Day, a discounted-shopping event to promote its subscription scheme.  Amazon’s Twitter account said it was working to resolve difficulties customers were having checking out.

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The promotion ran for the first time last year, when the site also faced technical problems. More than 34.4 million items were sold that day, exceeding the amount sold on Black Friday the previous year.

This year, customers complained of not being able to check out their purchases, with some missing deals available for a limited time. Others said they were experiencing issues adding items to their cart.

It is not uncommon for sites to struggle under unprecedented volumes of traffic while running promotions. Many websites suffered problems during last November’s Black Friday online rush, including Argos, Boots and Tesco.

Amazon Sees Profits and Sales Surge

Amazon Sees Profits and Sales Surge
Amazon has reported a profit of $513m (£351m) in its first quarter, helped by a 28% jump in sales. Sales hit $29.1bn for the three months to the end of March, helped by rising sales of its Kindle reading devices and Fire tablet computers.  Both sales and profits were higher than analysts had been expecting and Amazon shares jumped in after hours trading.

The company reported strong growth in customers for its Prime service, which includes free delivery and TV shows.

The results were a positive sign for investors who had been rattled by disappointing earnings from Apple and Microsoft. “It did restore my faith,” said Dan Conde, an analyst at the Enterprise Strategy Group.

Amazon’s cloud services unit was an important source of sales growth. The cloud business rents data storage space and software services to companies, and is Amazon’s fastest growing unit.

Revenue rose 64% year-over-year, reaching $2.5bn.

Investors have been watching Amazon’s cloud operation closely, particularly after one of its biggest customers, Apple, announced it would be moving some of its business elsewhere. Since the start of the year Amazon has added new televisions shows and films to its Prime service, which helped to attract new users.

In April, Amazon introduced options to pay monthly for the service. The plan is part of an effort to compete with video streaming services like Netflix and Hulu.

The company also attributed the increased number of Prime members to the expanded list of products eligible for free two-day shipping.

Amazon did not detail sales of devices like the Kindle and Fire table, but did say that the division has seen growth. “Amazon devices are the top selling products on Amazon, and customers purchased more than twice

Amazon to Create 1,000 New Jobs in Manchester

Amazon to Create 1,000 New Jobs in Manchester
Amazon is to create 1,000 jobs at a new centre in Manchester, the company has announced. The online retailer will open the centre in Wythenshawe in the autumn, with permanent jobs being created over three years. The posts will include engineers, computing staff, human resources and operation managers.

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The announcement is part of plans to create 2,500 new jobs this year, bringing the total workforce to 14,500.

Amazon is already planning to open a new centre in Coalville, Leicestershire, bringing its number of UK sites to 12. The company currently employs 40,000 people in Europe and last year created 10,000 jobs.

Mike Kane, MP for Wythenshawe and Sale East, said the announcement was “fantastic news” and part of a continuing “renaissance of Wythenshawe”. He added: “A thousand new permanent jobs over three years will open up new opportunities for many people in my constituency.”

Amazon’s Reporting of Sales Could Raise Tax Bill

Amazon’s Reporting of Sales Could Raise Tax Bill
Amazon, the global online retailer, is changing the way it records sales in a move that could see it paying more tax.

Transactions carried out in European markets were previously recorded in Luxembourg, with which Amazon had a low-tax agreement. Now sales made through subsidiaries in the UK, Germany, Spain and Italy will be registered in those countries, the retailer has said.

Amazon had received heavy criticism for its tax avoidance policies.

“More than two years ago, we began the process of establishing local country branches of Amazon EU Sarl, our primary retail operating company in Europe,” the company said in a statement. “As of 1 May, Amazon EU Sarl is recording retail sales made to customers through these branches in the UK, Germany, Spain and Italy. Previously, these retail sales were recorded in Luxembourg.”

Amazon added that it was “working on opening a branch for France”.

In recent years, the European Union has intensified its investigations into the tax deals negotiated by global companies with countries such as Ireland, Luxembourg and the Netherlands. It suspects that such deals amount to illegal state aid and distort competition.

Last year, the European Commission – the EU’s executive arm – launched a formal investigation into Amazon’s tax arrangements with Luxembourg.

And the EU is also looking into tech giant Apple’s tax dealings in Ireland, coffee-shop chain Starbucks’ dealings in the Netherlands, and Italian carmaker Fiat’s agreement with Luxembourg.

Amazon – EC says Luxembourg Tax Deal Probably State Aid

Amazon – EC says Luxembourg Tax Deal Probably State Aid
The European Commission has disclosed a preliminary finding that Amazon’s tax arrangements in Luxembourg probably constitute “state aid”. The EC’s doubts about the arrangement were detailed in a document on Friday. The EC said that its “preliminary view is that the tax ruling… by Luxembourg in favour of Amazon constitutes state aid.”

However, Amazon said it “has received no special tax treatment from Luxembourg”. “We are subject to the same tax laws as other companies operating here [in Luxembourg],” it said.

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The Luxembourg finance ministry said: “Luxembourg is confident that the state aid allegations in this case are without merit and will be able to convince the Commission of the legitimacy of the anticipatory decision in question and that no competitive advantage was granted,” it said.

The European Commission began a probe of the tax arrangement last year, saying that it had suspicions it broke EU rules. The Commission document, which was sent to the Luxembourg Ministry of Foreign Affairs in October, gives its rationale for launching the investigation. The Commission said it had “no indication” that the tax arrangement was “compatible with the internal market”.

The current European Commission chief, Jean-Claude Juncker, was prime minister of Luxembourg when the deal was struck. Mr Juncker has come under pressure over claims that around 340 global companies were granted tax avoidance deals during his 18 year tenure in Luxembourg.

Commission doubts over the Amazon deal included whether Luxembourg had properly looked into Amazon’s “transfer pricing” proposals about how money would be moved between different Amazon subsidiaries.

Doubts also existed about whether the country had assessed that the proposed tax regime was in line with market conditions before agreeing the deal in 2003, the European Commission document said.

The Commission also had questions about how royalty payments between certain Amazon companies were calculated, and whether “Amazon has a financial incentive to exaggerate the amount of the royalty” between its Luxembourg head office company and an Amazon firm that holds shares in the head office company.

“If the royalty is exaggerated, it would unduly reduce the tax paid by Amazon in Luxembourg by shifting profits to an untaxed entity from the perspective of corporate taxation,” the EC said. It added that Luxembourg might have been too hasty in assessing Amazon’s requested arrangement before striking the deal.

Luxembourg’s finance ministry said it “has provided all the information required by the Commission and cooperated fully with the Commission in its investigation. Among other things, detailed reports on the transfer price requested by the Commission were disclosed,” it added.

Luxembourg is also being investigated by the Commission over suspected “sweetheart” tax deals with the financing arm of carmaker Fiat.

In addition, Ireland’s tax deal with Apple and the Netherlands’ arrangement with Starbucks are being scrutinised as part of a crackdown on multinationals’ tax avoidance schemes.

Amazon to Deliver to Customers via Local Post Offices

Amazon to Deliver to Customers via Local Post Offices
Internet retailing giant Amazon and Royal Mail have joined forces to have customers’ items delivered to post offices for collection.

Earlier this month Royal Mail warned that rivals, including Amazon, were hitting its parcel delivery business. It said that Amazon’s own delivery service could dent its business by as much as 2% in the short term.

Now, Amazon customers will be able to have their parcels delivered by Royal Mail to 10,500 post office branches. “Clearly the reasoning behind this must be Royal Mail trying to save some of its business,” said city analyst Nicla Di Palma, of Brewin Dolphin.

Royal Mail’s parcel operations have suffered from intense competition since the group was privatised last year. The addition of the Royal Mail Local Collect “click and collect” facility means Amazon will have 16,000 pickup locations in the UK. Existing locations include “Pass my Parcel” newsagent and convenience stores, Collect+ stores and Amazon lockers at train stations.

Customers can select their preferred pickup location during the checkout process on Amazon’s website, and present identification at the post office branch to receive their parcel.

“This is a good thing,” said Lindsay Mackie, an expert on Royal Mail from the New Weather Institute. “Royal Mail needs to open up to be convenient for customers,” she said.

But many main post offices are closed on Saturday afternoons, which could make pick-up less convenient than in a corner shop.

“The problem with post offices is the opening hours,” said Ms Di Palma.

However, some post offices contained within other shops are open for up to 12 hours a day, and some have piloted Sunday opening.