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Amazon's sales surge 33 percent

Amazon swung to a profit for the third quarter as net sales surged 33 percent in a strong back-to-school season and the company benefited from favorable exchange rates.

The Internet retailer posted net income Tuesday of US$15.6 million, or US$0.04 per share, for the three months ended Sept. 30, compared with a net loss of US$35 million, or US$0.09 per share, in the third quarter of last year.

Excluding restructuring charges, accounting changes and other items, Amazon said it earned US$48 million, or US$0.11 a share. Analysts polled by Thomson First Call had expected earnings of US$0.10 a share.

Net sales rose to US$1.13 billion from US$851 million in third quarter of last year.

That included a benefit of US$29 million from changes in foreign exchange rates compared with the year-ago quarter.

"We had great growth and we're cautiously optimistic about the future," chief financial officer Tom Szkutak said.

"This was another great quarter for Amazon.com," Szkutak said.

He cited low prices, expanded selection and shipping, strong back-to-school sales and changes in foreign exchange rates as factors in the company's performance.

The company also gave its forecast for the upcoming holiday season, saying it expected fourth-quarter sales of US$1.76 billion to US$1.91 billion. Analysts expected sales of US$1.79 billion.

For next year, Amazon said it expects revenue of US$5.75 billion to US$6.25 billion. Analysts had put the number at US$6.1 billion.

Amazon shares fell US$0.24 to close at US$59.35 on the NASDAQ Stock Market before the earnings were released. The shares lost US$1.27, or 2 percent, in extended trading.

"Taken on its own merit, it was a great quarter for them," said Dan Geiman, an analyst with McAdams Wright Ragen in Seattle.

"But if you look at it from an investor's standpoint, they didn't beat expectations by quite as much as they did in the past, and the guidance for 2004 is a little conservative compared to what you've seen over the past quarters," he said.

Geiman said Amazon's sales jumped this year in part because it has granted customers free shipping on orders of US$25 or more, a lower threshold than before.

It could be tough for Amazon to boost sales as much next year -- one possible reason for the conservative estimates of next year's business, and for the market's negative reaction Tuesday, he said.

Instead, the company is focusing on expanding selection. In the past year it has added apparel and sporting goods sections to its Web site.

"They have this customer base that in general is fairly devoted," Geiman said.

"It's just expanding selection so they can fill everybody's taste and drive down the costs at the same time," he said.
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