Amazon’s profits slip by a third

AMAZON, the world’s largest online retailer, revealed a 33 per cent profit slump last night, as its investment in new businesses ate into earnings.

The US internet giant has ploughed millions into the promotion of its Kindle electronic-book reader, as well as into a new app for Android smartphones.

The costs hit its pre-tax profits, resulting in a slip to $201m (£122m) over the first-quarter of this year, down from the $299m it made over the same period a year earlier.

Yet the retailer outperformed analysts’ expectations with a 38 per cent increase in net sales to $9.86bn in the first three months of this year, up from $7.13bn over the first-quarter of 2010.

“When you look at the kind of growth acceleration it is showing on the top line and surpassing pretty much all Wall Street expectations, I think that clearly what it is doing makes sense,” said Ken Sena, analyst at Evercore partners.

Operating margin came to 3.3 per cent, in the middle of the range Amazon had forecast.

But Amazon expects that its investing to win market share will pay off. It forecast current-quarter revenue of $8.85bn to $9.65bn, above Wall Street expectations of $8.7bn.

Amazon’s sales increase was led by a 45 per cent rise in North America. Growth elsewhere was 27 per cent, excluding the effect of currency exchange.