Amazon posts lower profit

[notiCIas]

Amazon posts lower profit

The online retailer says a legal settlement hurt third-quarter results, shares fall after hours.

October 25, 2005: 4:47 PM EDT


LOS ANGELES (Reuters) - Online retailer Amazon.com Inc. Tuesday posted a lower quarterly profit and forecast sales below some Wall Street expectations, sending shares down 7 percent in after-hours trading.

The company offered a cautious revenue outlook for the critical holiday shopping season in the fourth quarter. The midpoint of Amazon's forecast revenue range, $3.01 billion, was below the Wall Street consensus of $3.08 billion.

Amazon (Research) shares fell over 7 percent on Inet after the results were announced.

Amazon said third-quarter net income fell to $30 million, or seven cents per share, compared with $54 million, or 13 cents per share a year earlier. On that basis analysts on average were expecting earnings of 10 cents per share, according to First Call.

Excluding the impact of a $40 million legal settlement -- $20 million after tax -- the company said net income would have been $50 million, or 12 cents per share.

Revenue grew to $1.9 billion, from $1.5 billion a year earlier, as sales in North America sales rose 28 percent and the company sold more than 1.6 million copies of "Harry Potter and the Half-Blood Prince."

Shares as of Monday's close were up about 5 percent in 2005, compared with a 1 percent drop for the S&P 500 index . Investors have worried that increased competition and fewer opportunities to expand product lines are cutting into margins at the online retailer.

Amazon is valued at a price to projected 2006 earnings per share of 46, below that of online rival Yahoo Inc. (Research) at 47, but at a premium to eBay Inc. (Research) at 39. Brick-and-mortar retailers, by contrast, trade at lower projected price-to-earnings ratios, withWal-Mart Stores Inc. (Research) at 17 times projected 2006 earnings per share and Target Corp. (Research) at 21.

Looking ahead, the company said it expects fourth-quarter sales to be between $2.86 billion and $3.16 billion. It forecast full-year net sales at between $8.37 billion and $8.67 billion.

Analysts on average were looking for fourth-quarter revenue of $3.08 billion in a range between $2.90 billion and $3.22 billion. For the full year, the Wall Street target was for revenue to range from $8.38 billion at the low end to $8.69 billion.