Amazon shares fall despite profits rise

Online retailer Amazon disappointed investors last night after its forecast for profits in the current quarter came in short of expectations.

Shares fell in after-hours trading in New York as Amazon highlighted the impact of investment in new warehousing and marketing to support its Kindle electronic reader.

It indicated that operating income could fall as much as 24% to $360m (€259m) or rise to 18% to $560m (€355.4m) in the fourth quarter, which means expenses are likely to rise.

The Seattle-based company reported a 7% improvement in operating income in the July to September quarter to $268m (€193m).

Larry Witt, an analyst at investment research firm Morningstar, said the level of expenses for both quarters had put a dampener on shares.

He added: “They’re still growing fast, but people are probably getting anxious to see operating leverage.”

Amazon reported a 39% rise in third quarter revenues to $7.56bn (€5.4bn), with sales from its largest category of electronics and general merchandise ahead 68% to almost $4bn (€2.87bn).

Revenues from books, CDs and DVDs lifted 14% to $3.35bn (€2.4bn). The best-selling book in the UK was 'The Girl Who Kicked the Hornets’ Nest' by Stieg Larsson, Amazon said.

Kindle has become Amazon’s fastest-selling and best-selling item. It recently launched a thinner version that works with Wi-Fi.

Amazon said its combined fulfilment, technology and content and marketing costs rose 47% to $1.36bn (€978,000) in the last quarter due to the 13 centres that Amazon has opened or will open this year to meet increased demand.

With the company running commercials for the Kindle, marketing spend jumped 62% to $241m (€173m).