Amazon profits dip as sales rise

27 Jul 2005

Online retailer Amazon.com has unveiled a slip in profits despite sales increasing by a quarter.

The group said profits for the three months to June dipped 32% to $52m (£29.9m) from $76m in the same period last year. Sales jumped 26% to $1.75bn.

Seattle-based Amazon has faced higher costs in recent months as a result of free and discount delivery offers.

But despite rising costs earnings beat expectations, coming in at 12 cents compared to forecasts of 8 cents.

The figures did include one-off costs for tax expenses and other items, without which the group would have boosted its earnings to 16 cents per share.

Delivery burden

Shares in the group rose $3.01, or 8%, to $40.75 in after hours trading as Amazon's results were released after the bell. In official trade its shares fell 21 cents to close at $37.74.

The group is facing higher shipping costs after introducing a new Prime Membership system in February, which provides members with unlimited free two-day delivery guarantees in the US in return for a flat fee of $79.

"Though expensive for the company, Amazon Prime creates a premium experience for customers who join, and as a result we hope they'll purchase more from us in the long term," founder and chief executive Jeff Bezos said.

The quarterly dip in profits followed a similar drop in the first quarter when it reported profits had slipped to $78m for the three months to the end of March from $111m a year ago.

Since its foundation 10 years ago, the company has transformed itself from a simple book seller into one of the world's biggest online retailers selling everything from DVDs to loose diamonds.

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