Amazon climbs to new high on record results

AMAZON saw record sales over the Christmas period, propelling the online retailer to new heights as the high street suffered.

The company last night posted revenues of $21.27bn (£13.5bn) for the fourth quarter of 2012, a 22 per cent increase on the same period last year.

Although revenues were less than analysts had predicted, Wall Street cheered the results. After-hours trading sent shares to all-time highs, as Amazon finally showed signs of increasing its notoriously thin profit margins.

The firm’s net profits were down on last year as Amazon invested in new products and services. But operating profits, which stripped out these activities, was up from $260m to $405m. Although Amazon’s main business is as a web retailer, it has branched out into more profitable activities in recent years such as ebooks and website hosting.

Investors have long been waiting for the company to turn its massive revenues into substantial profits. Amazon has historically sacrificed its margins in order to compete aggressively on price and establish itself as the web’s dominant retailer.

“The fourth-quarter operating income was up more than expected,” RJ Hottovy, an analyst at Morningstar, said. “This supports the bull case that Amazon can monetise its growth over the longer term.”

“We’re now seeing the transition we’ve been expecting,” the company’s chief executive Jeff Bezos said, revealing that ebook sales had risen 70 per cent last year and now represented “a multi-billion dollar category”.

Physical book sales – on which Amazon established its reputation in the 1990s – saw their slowest December growth in the company’s 17-year existence.

Amazon’s shares, which had risen steadily in anticipation of the announcement, went up nearly 10 per cent in after-hours trading.

Despite the results, Amazon suffered a net loss of $39m in 2012 overall, owing to a $169m writedown on online coupon business LivingSocial, which it booked in the third quarter.