Amazon reports good third quarter, warns about fourth

Add Amazon.com to the long list of retailers with lowered expectations for this year's holiday-sales season.

The online retailer gave a more tepid outlook for the fourth quarter than what many on Wall Street had expected, citing global economic turmoil.

Amazon said it expects sales for the current quarter, which includes the holidays, to range from $6 billion to $7 billion, down from Wall Street's prediction for nearly $7.1 billion.

"We experienced slower rates of growth toward the end of the third quarter coinciding with disruptions in the global financial markets," Chief Financial Officer Tom Szkutak said in a conference call with analysts.

The Seattle-based company released its third-quarter results after the close of regular trading Wednesday. Shares fell nearly $7 to $43.05 after ending down 24 cents to $49.99, near its 52-week low.

Wall Street seemed to react more to Amazon's outlook than to its actual results. The company said its third-quarter profit rose 48 percent to $118 million, or 27 cents a share. That was up from $80 million, or 19 cents a share, a year ago.

For the three months ended Sept. 30, Amazon had sales of $4.26 billion, a 31 percent increase from the same period last year. Analysts surveyed by Thomson Reuters expected a per-share profit of 25 cents and sales of $4.27 billion.

"They're starting to see some impacts from the consumer environment," said Dan Geiman, of McAdams Wright Ragen in Seattle.

Investors had hoped Amazon would do well in an economic downturn as cash-strapped consumers turned to the Internet for bargains.

Chief Executive Officer Jeff Bezos reinforced that notion Wednesday, telling analysts that he thinks Amazon is well positioned "because we have spent so much time making sure we are the low-cost provider, and that is something that is likely to be appealing to people in this kind of economy."

Still, analysts said Amazon's outlook is more evidence that the downturn is hurting virtually all retailers.

"They're taking huge amounts of market share, but nobody is immune," said Tim Boyd, an analyst with American Technology Research in Greenwich, Conn. "The consumer is under tremendous pressure, and Amazon was going to see it sooner or later."

The company said its third-quarter profit got a $15 million boost from the dollar's weakness against foreign currencies. That's because sales made in stronger currencies are adjusted upward when translated to U.S. dollars. But the dollar's subsequent surge suggests Amazon might no longer see a bottom-line benefit.

Sales from Amazon's U.S. and Canadian Web sites were up 29 percent to $2.3 billion. Sales from its U.K., German, Japanese, French and Chinese sites rose 33 percent to $1.96 billion. Without the favorable exchange rates, international sales would have risen 28 percent.

Sales of electronics and other merchandise jumped 52 percent year-over-year to $1.64 billion, while sales of items such as books, CDs and DVDs grew 19 percent to $2.49 billion.

Amazon also said:

• Sales of its electronic reading device, the Kindle, have exceeded expectations, although it has not released sales figures since introducing the Kindle in November 2007.

• It had bought California-based Reflexive Entertainment, which develops and distributes video games, for an undisclosed price.

• It has exercised its option to lease an additional 320,000 square feet of space in the campus Vulcan Real Estate is building for it in Seattle's South Lake Union. Amazon had already committed to lease more than 1.3 million square feet. The 320,000-square-foot complex would be built on Boren Avenue North between John and Thomas streets.

Times business reporter Eric Pryne

contributed to this report