What recession? Amazon posts amazing second quarter, but downplays Kindle

Amazon (AMZN) added its contribution to the NASDAQ party today with strong second-quarter earnings. The online retailer that Jeff Bezos built increased net sales by 14 percent, to $4.65 billion, year-over-year. Excluding the impact of unfavorable currency exchange rates, Amazon net sales would have risen by an impressive 20 percent.

Second-quarter operating income fell from $217 million in Q2 2008 to $159 million this spring. But that diminished number included a $51 million writedown for a settlement with Toys"R"Us. Likewise, last year's stronger number included a $53 million one-time, non-cash gain for sales of European DVD rental assets. So on a normalized basis, operating income would have risen by roughly $34 million. Investors applauded, sending shares up by more than 5 percent in the aftermarket.

Free cash flow rose to $1.54 billion for the last 12 months. Translation? Amazon has a lot more money to play with (to buy properties like competitor Zappos.com). However, shareholders might be a little concerned that Amazon continued to dilute its shareholder base, adding 5 million shares over the second quarter in 2008.

For those shareholders who want Amazon to make more money in shipping, Amazon appears headed in the opposite direction. "We're pleased that customers saved more than $900 million with our free shipping offers, including Amazon Prime, over the last year," said founder and CEO Bezos .

In North America, Amazon managed to post a strong 13 percent year-over-year gain despite the dreadful U.S. economy. This appears to be further evidence that the shift from brick-and-mortar to online retail is still going strong. Amazon's highly scalable fulfillment service offering gained more converts as the company trebled the number of companies using Fulfillment by Amazon.

Notablly absent from the release were specific numbers breaking out sales of the new Kindle -- leading to some concerns that perhaps the introduction of the DX this year did not go as well as hoped.

Amazon issued very wide guidance for the third quarter, saying sales growth could range from 11 percent to 23 percent. That's perhaps an indication that Amazon is still unsure how bad the economy will get, and how that will impact the company. But if this quarter is any indication, Amazon has nothing to worry about.

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