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Last Updated: Friday, 3 February 2006, 00:05 GMT
Poor end to the year for Amazon
Amazon
Amazon's margins are coming under pressure
Online retailer Amazon has reported a drop in net profit for the fourth quarter, which includes the critical Christmas holiday season.

Net profit for the three months to 31 December came in at $199m (112m), compared to $347m the year before.

Sales for the period rose from $2.54bn to $2.98bn, but failed to pass the $3bn barrier as analysts forecasted.

Amazon's results were released after the markets closed, but in after-hours trading, its shares were down 10%.

Slowing sales growth

Amazon warned that sales growth was slowing before Christmas and, until today's results, its shares had fallen 11% since mid-December.

"Operating income increased a mere 1 percent in the fourth quarter," said Todd Chanko, an analyst with Jupiter Research.

"That's not very impressive considering the fourth quarter is when retail enjoys its greatest sales."

Analysts have suggested that Amazon may be losing market share to traditional retailers such as Wal-Mart and Target as well as auction sites like eBay and search engines like Google.

There have also been concerns that the company's profit margins are being hit by the success of its "Amazon Prime" delivery programme, which offers free unlimited delivery to anyone paying a flat fee of $79 a year.

Amazon's expenses for shipping, marketing and online content rose 31% to $502m in the fourth quarter of 2005 compared to the same period in 2004.


SEE ALSO:
Amazon puts the web up for rent
15 Dec 05 |  Technology
Amazon warning of slow holidays
26 Oct 05 |  Business
Amazon profits dip as sales rise
26 Jul 05 |  Business
Birthday greetings to Amazon.com
12 Jul 05 |  Business
Amazon pushes e-tailing expertise
20 Apr 05 |  Business
Disappointing profits hit Amazon
03 Feb 05 |  Business
Amazon denies gift glitch rumours
23 Dec 04 |  Business
Amazon moves into Chinese market
19 Aug 04 |  Business


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