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Amazon reports modest Q1 results

Amazon, the world’s biggest online retailer by sales, delivered a modest set of results with improving profit margins but signs that its sales growth was slowing.

The Seattle-based company reported a rise in its gross profit margin – a closely watched measure of profitability – in the three months to March 31, although net income fell 37 per cent from last year to $82m, or 18 cents per share.

Amazon’s sales rose 22 per cent to $16.1bn, matching expectations, it said on Thursday. But the percentage gain was the same as the previous quarter and lower than in periods before that.

Amazon’s profitability is strongly influenced by its investment decisions as it goes through periodic bursts of capital spending on new warehouses, data centres and devices. Its shares oscillated in after-hours trading once its results were released but settled down 2.9 per cent at $266.87. Amazon shares had underperformed the market in the three months to yesterday.

While Amazon’s margins remain thin compared with its peers, bullish investors say its investments are welcome as they keep sales growing. Bears, however, question whether the company can ever achieve sustainable profit growth.

In a statement, Jeff Bezos, Amazon’s founder and chief executive, highlighted the recent release of original television shows from Amazon’s studio division, which is part of its strategy to win the loyalty of more consumers. But on a call with analysts Tom Szkutak, chief financial officer, declined to comment on a report that Amazon is developing a set-top box for televisions.

Source : Barney Jopson – Financial Times

26 April 2013
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