Amazon Profit Lower Than Expected, Outlook Cautious

Online retailer Inc. (AMZN) Tuesday posted a lower quarterly profit and forecast sales below some Wall Street expectations, sending shares down 6 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 said third-quarter net income fell to $30 million, or 7 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 9 cents per share, according to Reuters Estimates.

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 (search)."

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 (YHOO) at 47, but at a premium to eBay Inc. (EBAY) at 39. Brick-and-mortar retailers, by contrast, trade at lower projected price-to-earnings ratios, with Wal-Mart Stores Inc (WMT) at 17 times projected 2006 earnings per share and Target Corp. (TGT) 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.

Shares fell $2.83 cents or 6.13 percent to $43.34 on Inet after the results were announced.