|
The world's largest web retailer disappointed analysts
Shares in
online retailer Amazon have fallen 14.6% in US trade, hit by
weaker-than-expected profits.
Earnings rose sharply in the three months to
December but investors were unimpressed
as the figure had been boosted by a one-off tax-break.
Profits for the period rose 250% to $346.7m (￡184m), but with the $244m
tax benefit stripped out, its profit per share fell from 82 cents to 24
cents.
Wall Street analysts had expected the company to post a 40-cent figure.
Total revenues for the three months to 31 December were $2.54bn, up 30%
from the $1.95bn for the same period last year, benefiting from record
sales during the festive period.
Martin Pyykkonen, an analyst at Janco Partners, said Amazon's worsening
profit margins "stuck out like a sore thumb".
"They're selling more stuff and making less profit margin on it," he
said.
Fellow analyst Chris Baggini, manager of the Gartmore Growth Fund, was
even more critical.
"Margins are well below expectations - revenues were good, but margins
are a disaster."
Mr Baggini blamed the drop in profits on tough price competition from
other online retailers.
In an effort to attract more customers, Amazon
also announced on Wednesday that it would begin offering its US customers
the option of paying a flat annual
fee
of $79 for unlimited free two-day delivery on
orders.
In a letter to customers posted on the retailer's US website, Amazon
chief executive Jeff Bezos said he expected the new program to be
expensive for Amazon in the short-term but hoped it would build greater
long-term loyalty.
Yet analysts said that while such moves may be good for the consumer,
they squeeze margins - prompting concerns about profits in the face on
rising competition.
"The fact is, Amazon is really facing a very difficult environment in
the competitive landscape, and they're not acknowledging it," Piper
Jaffray analyst Safa Rashtchy said.
Mr Rashtchy added that the company appeared to increase spending in
areas such as marketing and new technology, merely to keep pace with other
online merchants - not beat them.
For 2004 as a whole, Amazon reported profits of $588.5m on revenues of
$6.92bn. That compares with 2003 earnings of $35m on revenues of $5.26bn.
(BBC) | 
Updated: 2005-02-04 09:46
