UPDATED: Oh, it was a very merry Christmas for Amazon, yet somehow investors still found coal in their stockings.
Propelled by strong holiday sales, Amazon posted net income for the fourth quarter of $207 million, or 48 cents a share. That’s a 112 percent increase from the same period last year, when the Web’s largest retailer posted earnings of $98 million, or 23 cents a share.
Amazon’s earnings per share matched analysts’ consensus, according to polling from Thomson Financial.
“This quarter showed accelerated sales growth and record operating profits,” said Jeff Bezos, Amazon’s founder and CEO, in a statement. “In our view, these unusual financial results are driven by one thing: continuously improving the customer experience.”
Amazon reported total Q4 revenue of $5.67 billion, a 42 percent increase over last year’s haul during the same period. Quarterly revenue also shot past analysts’ consensus projection of $5.38 billion, as well as the high end of Amazon’s own guidance of $5.45 billion.
Looking ahead, Amazon is expecting first-quarter sales of between $3.95 billion and $4.15 billion, an increase of between 31 percent and 38 percent over the same period last year.
Investors’ consensus for Q1 gross revenue was $3.92 billion, well under the low end of Amazon’s guidance range.
Amazon finished the day up a fraction of a point to close at $74.21, but after the bell, shares fell more than 12 percent, despite reporting earnings that exceeded analyst expectations.
The after-hours sell-off may have been the result of a constricting margin. Despite more than doubling last year’s net earnings, Amazon’s fourth-quarter gross margin dropped to 20.6 percent from 21.3 percent in 2006.
Bezos deflected analysts’ questions about slipping margins by emphasizing that the company viewed its free cash flow as a better yardstick of the company’s health. In Q4, Amazon reported free cash flow of $1.18 billion, up 143 percent from the end of 2006.
Still, Bezos did say that he expects Amazon to be able to improve its margins. Buoyed by the strong sales, Amazon will have a favorable bargaining position with its vendors to allow it to reduce overhead.
Amazon experienced other mixed fortunes as well. Looking back on the quarter, the company hailed the success of its Kindle e-book reader, though Bezos acknowledged that demand outstripped supply, creating inventory shortages.
“On the manufacturing side, it’s causing us to scramble. We’re working very hard to address that,” Bezos said. “Our goal is to get to a situation where when you order a Kindle, we ship it immediately.”