AP
Amazon.com 1Q profit rises 29 percent
Wednesday April 23, 7:12 pm ET
By Jessica Mintz, AP Technology Writer
Amazon.com 1st-quarter profit climbs 29 percent, but full-year outlook spooks investors


SEATTLE (AP) -- Web retailer Amazon.com Inc. said Wednesday that its first-quarter profit rose 29 percent, helped by solid sales in the U.S. and abroad.

But a variety of factors, including slower growth in U.S. sales, international margin troubles and lower guidance for the full fiscal year pushed shares down $4.25, or 5.2 percent, to $76.75 in after-hours trading. The stock had closed up $1.40 at $81.

Quarterly earnings climbed to $143 million, or 34 cents per share, from $111 million, or 26 cents per share, in the same period last year.

Those results beat Wall Street's expectations. Analysts surveyed by Thomson Financial had forecast a profit of 32 cents per share.

Revenue increased 37 percent to $4.14 billion from $3.02 billion in the year-ago quarter.

Sales in North America rose 31 percent to $2.13 billion from a year ago. International sales grew 44 percent to $2.01 billion, and accounted for 49 percent of total revenue, up from 46 percent last year.

Chief Financial Officer Tom Szkutak said in a conference call Wednesday that he did not see evidence in Amazon's results that U.S. shoppers had changed their buying behavior, despite widespread concern about a possible recession.

"We don't have a lot of data points about the economy specifically, but what we're seeing in our business is, it's very solid," he said.

Tim Boyd, an analyst for American Technology Research, said in an interview that Amazon's ability to keep its revenue rising despite a tough economic climate is impressive. The quarterly report didn't raise any major red flags, but the analyst, who rates the stock a "sell," said he noticed enough yellow flags to stay cautious.

For one thing, growth in sales of books, CDs and other items in the U.S. "media" category slowed compared with the previous quarter, as did growth in electronics and general merchandise sales.

Adjusted for the effects of a weak U.S. dollar, growth in international sales overall slowed down, too.

And while U.S. margins improved, international margins worsened. Amazon said that's the expected result of selling items in new categories at aggressively low prices from the start, before Amazon can sell enough to command lower prices from suppliers.

Far from surprising, Boyd said the results seemed to be "returning to more normal growth" after a stronger-than-usual year in 2007. But, he said, that won't stop Wall Street from selling into tomorrow's session.

"What you have here is, you have a tired bull story, where people's expectations have gotten ahead of what they (Amazon) can actually deliver," the analyst said.

Amazon said it expects sales between $3.86 billion and $4.08 billion for the current quarter. Analysts are looking for $3.84 billion.

For the year, the retailer forecast $19.1 billion to $20.0 billion in revenue, close to Wall Street's current outlook for $19.29 billion.

However, during and after the conference call, analysts pointed out that Amazon had effectively cut its revenue guidance for the year.

Adjusting for annual revenue expected from Audible.com, a recently acquired audio book company, and for the effects of a weak dollar, Amazon's guidance called for revenue to grow more slowly than previously expected in 2008.

Amazon's operating income guidance for the year -- $740 million to $940 million -- also came in lower on both ends than the company's forecast three months ago, by about $45 million.

Szkutak explained that that number was depressed by stock option expenses and costs associated with the acquisition of audio book company Audible.com, and did not reflect expected changes in company performance.