Amazon Q4 sales grow strongly, though profits slow

Amazon.com has reported a strong surge in fourth quarter sales, up 36 per cent to $1.95bn for the period ending 31 December 2003 - but analysts were disappointed that profit margins haven't kept pace, and AMZN shares fell in after-hours trading.

Net Q4 profit stood at $73.2m, up from $2.7m 12 months ago, and with a strong string of recent quarterly results the e-tailer turned in its first profitable year.

The company has highlighted the success of its newer business units and benefited from the weakening of the dollar in recent months.

Robin Terrell, Amazon UK MD, told silicon.com that non-US businesses in Canada, France, Germany, Japan and the UK had experienced "spectacular growth" in sales. They grew at a rate of 74 per cent in Q4 compared to 36 per cent for the company as a whole. Stripping out exchange rate changes in the period, international growth was 54 per cent.

"The upside in revenues didn't translate into upside in the bottom line. That is what people expect,'' Safa Rashtchy, an analyst at Piper Jaffray, said.

Terrell countered: "Overall we've had a great quarter and a great year. No one should be surprised by the erosion in our gross margins. We saved customers $100m in delivery costs last year. There's a short-term cost [to that] but it's right for the long term."

Across its operations the company was pleased with sales of newer categories of product in the busy Christmas quarter. While products such as DVD players and digital cameras are becoming as accepted as books and CDs on Amazon, in the UK a chocolate fondue set was a surprise hit.

"That gives us huge optimism," Terrell added.

Reuters contributed to this report.