Amazon's Forecast Gives Pause

The company takes down its full-year operating income forecast.
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Updated since 4:58 p.m. EDT

SAN FRANCISCO --

Amazon

(AMZN) - Get Report

edged out Wall Street's estimates for the first quarter but lowered its outlook for operating income for the full year.

The Seattle-based Internet retailer reported a first-quarter profit of $143 million, or 34 cents a share, compared with $111 million, or 26 cents a share, a year ago. Wall Street analysts were expecting earnings of 32 cents a share.

Amazon's revenue climbed 37% to $4.13 billion in the first quarter compared with $3.02 billion a year ago. That beat estimates by analysts of $4.08 billion.

Excluding an $18 million favorable impact in foreign exchange rates, revenue increased 31% in the first quarter compared with a year ago. But that was down from Amazon's growth of 37% in the fourth quarter.

Chief Financial Officer Thomas Szkutak hesitated to point to any macroeconomic issues that might be affecting Amazon, despite fielding repeated questions by analysts on Wednesday's conference call.

"It's difficult to say," he said. "We don't have a lot of data points around the economy. We see some pretty good strengths across a lot of categories."

Operating income for the first quarter was up 36% to $198 million compared with $145 million a year ago. Excluding a $14 million favorable impact from foreign exchange rates, operating income grew 27%.

Operating margin, which analysts have been keeping a close eye on, was 4.8% in the first quarter, or essentially flat with the fourth quarter. That caused some disappointment on Wall Street, which was looking for some improvement.

Shares of Amazon were down 5.3%, or $4.30, to $76.70 in recent after-hours trading.

The company raised its full-year revenue forecast to the range of $19.1 billion and $20 billion, up from its previous guidance in the range of $18.75 billion and $19.75 billion. That includes more than 400 basis points of positive impact from foreign exchange rates. Analysts had estimated 2008 revenue of $19.29 billion.

For the second quarter, Amazon expects revenue of between $3.88 billion and $4.08 billion, which includes 700 basis points of positive impact from foreign exchange rates. Analysts had been looking for second quarter revenue of $3.84 billion.

Amazon forecast operating income for the second quarter in the range of $120 million and $160 million. It expects operating income for the year to be between $740 million and $940 million, which is down from its previous guidance of $785 million to $985 million.

North American sales for Amazon rose 31% in the first quarter from a year ago, to $2.13 billion. That was down from the 40% growth the company saw in the fourth quarter.

International sales, which include Amazon's sites in the U.K., Germany, Japan, France and China, were up 44% to $2.01 billion. Excluding the favorable impact from foreign currency exchange rates, international sales grew 31%. That was also down from the fourth quarter's growth of 35%.

Worldwide media sales grew 28% over last year in the same period, a decrease from the 33% growth in the fourth quarter. Sales for worldwide electronics and other general merchandise grew 56% from a year ago, down from 58% in the fourth quarter.

Amazon's rival,

eBay

(EBAY) - Get Report

, has also been experiencing a bit of a slowdown. The online auction site reported first-quarter results a week ago, which showed the growth in its active users almost flat and the number of the new listings on the site up only 4% from the previous quarter.

Most Internet companies are loathe to admit that the economy might be having any sort of an impact on their numbers.

Yahoo!

(YHOO)

on Tuesday posted an earnings beat but some analysts remain concerned about its future prospects.

Google

(GOOG) - Get Report

, on the other hand, managed to transcend recessionary fears, handily topping Wall Street's expectations last Thursday.