Amazon Stock Soars on Strong Profit and Outlook

By: AP
By: AP

NEW YORK - Amazon.com Inc. said Thursday that its fourth-quarter profit rose 9 percent and easily surpassed analysts' forecasts. Those results, plus an optimistic forecast, sent its shares soaring 13 percent in extended trading.

In December, Amazon called the holiday season its "best ever," and the earnings report backed up the idea that the online retailer is not being seriously hurt by cutbacks in consumer spending. Amazon said its revenue in the current quarter should be between $4.53 billion and $4.93 billion, while analysts are expecting $4.57 billion.

Shares of the Seattle-based company shot up $6.60 or 13.2 percent, to $56.60 in after-hours trading following the release of the earnings report. The stock had fallen 36 cents to finish regular trading at $50.

Amazon said its profit in the fourth quarter was $225 million, or 52 cents per share, compared with $207 million, or 48 cents per share, in the same quarter last year. Analysts, on average, had been expecting 39 cents per share, according to Thomson Reuters.

Revenue rose 18 percent to $6.7 billion, exceeding analyst estimates for $6.4 billion. If not for the strengthening dollar, which diminishes the value of sales in other currencies, Amazon said its revenue would have risen 24 percent.

Sales of items like books, CDs and DVDs climbed 9 percent to $3.64 billion, and sales of electronics and other merchandise rose 31 percent to $2.89 billion.

The recession's effects may have shown up in one key figure — Amazon's gross profit margin. It declined to 20.1 percent, from 20.6 percent in the fourth quarter of 2007.

In a conference call with reporters, Chief Financial Officer Tom Szkutak said the fall could be attributed in part to price cuts.

Retailers were especially hungry for consumer dollars during the holiday quarter: According to data from comScore Inc., Web retail sales alone fell 3 percent to $25.54 billion from Nov. 1 to Dec. 23, and probably fell 4 percent to $36.38 billion in the fourth quarter.

RBC Capital Markets analyst Stephen Ju said the drop in Amazon's gross margin was expected, given the discounting going on at its competitors. "They need to keep up — that's how they operate," he said.

Jeffrey Lindsay, an analyst with Sanford C. Bernstein, said he was "pleasantly surprised" by Amazon's results and that they indicate that the shift among consumers toward buying more items online is definitely holding up.

"People may be spending less in general, but they're spending a lot more of it online. Amazon has benefited from that to a very large extent," he said.

Amazon also said revenue from shipping — which includes revenue from Amazon Prime, its membership-based two-day shipping program, and Fulfillment by Amazon, which is its third-party shipping program — rose less than 1 percent to $266 million.

The company's net shipping cost rose as well, though, climbing 32 percent year over year to $242 million.

During the quarter Amazon made 45,000 additional book titles available for its wireless electronic reading device, the Kindle, for a current total of 230,000. The company has not released sales figures for the Kindle device, and is widely believed to be releasing a new version in early February.

For the full year, Amazon earned $645 million, or $1.49 per share, on $19.2 billion in revenue. The company earned $476 million, or $1.12 per share, on revenue of $14.8 billion during 2007.


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