Amazon profit dragged down by expansion

 
Michael Bow
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AMAZON, the online retailer, reported a sharp drop in profits last night as its massive investment programme took its toll on the company balance sheet.

The firm reported quarterly profits of $7m (£4.5m) versus $191m a year ago, equating to earnings per share of just one cent compared to 41 cents a share a year earlier.

This was despite net sales increasing 29 per cent to $12.83bn in the second quarter, compared with $9.91bn in second quarter of 2011.

Its investing activities have hammered the company’s earnings over the past year as it spends heavily on overseas expansion and attempts to compete with large tech companies on digital content.

Chief financial officer Tom Szkutak said operating expenses are growing faster than revenue and suggested that this may continue.

“We’re investing a lot because of the opportunities we see,” he said.

The firm, which offers DVDs and books at knock down prices, also forecast a possible loss in the third quarter.

It said operating income losses were expected to be between $350m and $50m, down from $79m in the previous year.

Amazon shares were up 1.25 per in after hours trading.