Discounts propel Amazon.com to strong showing

SEATTLE (AP) -- Amazon.com rode discounts and free shipping to strong fourth-quarter results, capping a year in which the Internet retailer posted its first annual profit.
Earnings for the quarter that ended Dec. 31 were $73.2 million or 17 cents per share, far better than the $2.7 million, 1 cent per share it earned in the same period of 2002.
Sales for the three-month period were nearly $1.95 billion, up 36 percent from $1.43 billion a year earlier.
Amazon.com chief executive Jeff Bezos said the company and customers benefited from year-round free shipping options and discount pricing. But analysts said some investors may be concerned Amazon has cut prices too deeply to gain customers.
"The question, I think, in some people's minds is, 'Do they need to lower prices by the degree to which they have been?'" said Dan Geiman, an analyst with McAdams Wright Ragen.
Added Safa Rashtchy, an analyst with Piper Jaffray: "It's great to be an Amazon customer right now, but maybe it's not good to be an Amazon shareholder right now."
Rashtchy said some investors also might have been looking for the company's impressive sales growth to translate into bigger profits. But he said the company's price-cutting strategies are a smart way to build the business for the long term.
Amazon.com also logged its first annual profit. For the 12-month period, the company reported earnings of $35.3 million or 8 cents per share on revenue of $5.26 billion. That compared with a loss of $149.1 million or 39 cents per share on revenue of $3.93 billion in 2002.
Amazon.com, which began as a virtual bookstore, now sells everything from steaks to golf balls online.