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Amazon moves back into the black, but rate of growth disappoints investors

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Amazon has bounced back into profit in its latest full year.


The US ecommerce giant, which, trading in the UK as Amazon UK is this country's biggest online merchant, said overnight that sales in the fourth quarter to December 31 were up by 20% at $25.59bn (£15.6bn) and in the full year, to the same date, by 22% to $74.45bn (£45.2bn), up from $61.09bn (£37.1bn) at the same time last year.

Profits were up sharply, with net income up 146% on last time to $239m (£145.1m) in the fourth quarter, from $97m (£58.9m) at the same time last year. Over the year, net income came in at $274m (£166.4m), from a loss of $39m (£23.7m) last time.

But the company's share price fell in after-hours trading by up to 10%, at its peak, as sales fell short of expectations. At the time of writing, the pre-market share price was down by 5.45%.

Factors driving sales growth have included the paid-for Amazon Prime membership programme, which, said Amazon, was so popular in December that it limited sign-ups in peak periods. Prime-related benefits are also expanding with more instant video available, along with more titles in the Kindle lending library, open to Prime members. Prime Instant Video will also be the only online outlet for a new Halle Berry drama Extant, set to premiere on CBS in June. The fourth quarter also included the launch of the Australian Kindle store.

Founder and chief executive Jeff Bezos promised shoppers the company would continue to improve customer service. “It’s a good time to be an Amazon customer," he said. "You can now read your Kindle gate-to-gate, get instant on-device tech support via our revolutionary Mayday button, and have packages delivered to your door even on Sundays. In just the last weeks, Forrester, YouGov, and ForeSee have all ranked Amazon #1 – and we believe we’re just scratching the surface of what world-class customer service can be.”

Looking ahead, the company predicted first quarter 2014 sales would grow in a range between $18.2bn (£11.05bn) and $19.9bn (£12.1bn), or between 13% and 24% compared with the same period in 2013, while predictions for operating profit over that period were even broader: between a loss of $200m (£121.5m) and a profit of the same amount. “Our results are inherently unpredictable,” said Amazon’s statement, “and may be materially affected by many factors such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the internet and online commerce.” It also said it was setting aside $350m (£212.6m) for stock-based compensation and writedowns of intangible assets.

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