Amazon Q4 Earnings Fall 58%

By Alan Wolf -- TWICE, 2/1/2012

Palo Alto, Calif. - Amazon.com reported a 58 percent drop in fourth-quarter profits amid higher fulfillment, content and marketing costs.

Net income fell to $177 million from $416 million for the year-ago period, while net sales rose 35 percent to $17.4 billion for the three months ended Dec. 31.

The earnings decline eased from the prior quarter, when profits plunged 73 percent. At the time, chief financial officer Tom Szkutak said higher operating expenses, including increased investments in capacity, distribution facilities, and digital content, would impact fourth-quarter results.

Indeed, fulfillment costs rose 52.2 percent to $1.7 billion, technology and content expenses increased 66 percent to $862 million, and marketing costs rose 57.7 percent to $593 million during the quarter.

In North America, net sales rose 37 percent to $9.9 billion, while sales within the electronics and other general merchandise category increased 51 percent to $6.9 billion.

In a statement, founder/CEO Jeff Bezos cited Kindle as the company's bestselling product in the U.S. and Europe, and said Amazon's millions of third-party sellers now represent 36 percent of all units sold on the site after realizing 65 percent unit growth over the holiday season.

In addition, customers of Amazon Appstore for Android nearly tripled in number during the quarter and downloaded more apps than in all previous quarters combined, the company said.

For the full year, net sales rose 37 percent to $47 billion, excluding a $1.1 billion boost from favorable exchanges rates, and net income declined 45 percent to $631 million.