Amazon shares fall despite growth

Amazon said it had not seen signs of customers changing their behaviour

Shares in Amazon fell in New York despite the online retailer reporting strong profit and sales growth in the first three months of 2008.

Over the period, Amazon's net income rose 30% to $143m (£72m) which was better than expected.

But there was concern about what would happen to its profit margins later in the year if prices have to be cut to attract hard-hit US consumers.

Nervous investors sent Amazon shares down $3.30, or 4%, to $77.70.

It's a good revenue story, but the margins are not expanding as the more bullish people have been hoping Martin Pyykkonen, Global Crown Capital See Amazon's share price

"Our sales growth this quarter was driven by low prices and millions of in-stock items available for immediate shipment," said Jeff Bezos, Amazon founder and chief executive.

But there are worries that stiff price competition will see an erosion of earnings despite impressive revenue growth.

'Price competition'

"It's a good revenue story, but the margins are not expanding as the more bullish people have been hoping," said Martin Pyykkonen at Global Crown Capital.

"They are indicating they can sell more, and they are selling more, but presumably in here there is a lot of price competition."

Amazon's chief financial officer Tom Szkutak said that he had not seen evidence of US shoppers changing their habits ahead of a possible recession.

But analysts said there were signs that the business outside the US was being forced to cut prices as it attempted to move into new areas.