Amazon profit up, but margins squeezed

LOS ANGELES (Reuters) - Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) on Wednesday issued quarterly earnings and full-year sales forecasts ahead of Wall Street targets, but profit margins declined in what one analyst called a disappointment.

Shares of the Internet retailer, which trade at a huge premium to peers, fell about 3.5 percent to $71.61 in after-hours trade.

Hamed Khorsand of BWS Financial noted that gross profit margins were down from a year ago and the previous quarter.

"That was disappointing," he said. "It seems there was a lot of promotions, discounting in the quarter." The operating income outlook "doesn't look too great," he added.

The fourth-quarter gross margin of 20.6 percent was below 21.3 percent a year earlier and 23.4 percent in the third quarter.

Net profit rose 112 percent to $207 million, or 48 cents per share, from $98 million, or 23 cents per share, a year ago. Sales rose 42 percent to $5.67 billion in the quarter.

Analysts, on average, had been expecting Seattle-based Amazon to post earnings of 47 cents per share on revenue of $5.36 billion, according to Reuters Estimates.

Operating income rose 38 percent to $271 million.

Amazon had been expecting quarterly net sales to range between $5.1 billion to $5.45 billion with operating income of $221 million to $291 million.