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Amazon profits meet estimates
No. 1 Internet retailer earns 29 cents a share on strong sales growth, but stock slips after hours.
January 27, 2004: 5:53 PM EST

NEW YORK (CNN/Money) - Inc. Tuesday reported higher fourth-quarter profits that met Wall Street forecasts, boosted by stronger-than-expected sales growth.

The world's biggest Internet retailer said it earned $125 million, or 29 cents a share, excluding certain items, up from $75 million, or 19 cents a share, on the same basis a year earlier. Analysts had forecast a profit of 29 cents a share on average, according to First Call.

But Amazon (AMZN: Research, Estimates)'s stock fell in after-hours trading, according to Instinet, after falling 2.3 percent in regular trading on Nasdaq.

"Investors perhaps were disappointed that profits didn't beat estimates, even by just a little bit. Actually, this is the first time after eight straight quarters that Amazon didn't beat expectations," said Dan Geiman, analyst with McAdams Wright Ragen.

"Amazon looked pretty strong on sales although gross margins and operating expense were somewhat lower than expected," Geiman said. Gross margin is a key measure of profitability.

Including amortization, stock-based compensation expenses, restructuring and other charges, the company's net profit jumped to $73 million, or 17 cents a share, from $3 million, or 1 cent a share, a year earlier. This was the second consecutive quarter of net profits for the Seattle-based retailer.

Sales jumped 36 percent to $1.95 billion versus forecasts of about $1.86 billion. Amazon last month wrapped up its busiest holiday season ever during which it set a one-day record with more than 2 million units ordered.

The company's international division reported sales up 74 percent from a year ago.

"Our commitment to year-round free shipping and lower prices continues to be a win-win for our customers and," CEO Jeff Bezos said in a statement. "In addition to purchasing thousands of $29 DVD players this holiday season, customers also bought Tibetan yak cheese, pomegranate molasses and zero carb cheese straws."

Tom Szkutak

Amazon said it expects sales of $1.39 billion to $1.49 billion for the first quarter -- which would be up from 28 to 38 percent from a year earlier, and between $6.2 billion and $6.7 billion for the full year 2004. That compares with analysts' forecasts of $1.3 billion for the first quarter and $6.2 billion forecast for the full year 2004, according to First Call.

"The revenue guidance for the first quarter looks pretty solid," said Safa Rashtchy, analyst with Piper Jaffray.

Though Amazon did not give earnings-per-share guidance, it said it expects operating income of $80 million to $100 million for the first quarter.

Analysts expect Amazon to earn 16 cents a share in the first quarter and 89 cents a share for full year 2004.

"Our 2004 guidance we believe is conservative," said Tom Szkutak, Amazon's chief financial officer, said in the company's earnings call. "We cannot predict fluctuations in foreign currency and in global rates of the euro, pound and yen. This could have a significant impact, positively or negatively, on our results."

Additionally, Szkutak said Amazon customers should expect more product selection, lower prices in all product categories, and a global expansion of its super saver shipping incentives for orders over $25. But he added that these strategies would continue to pressure the retailer's gross margins going forward.  Top of page

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