Tech Industry

Amazon.com sales soar, but profits elusive

Shares of the online retailer fluctuate wildly and end higher after the company cautions that higher seasonal sales will not translate into lower net losses.

Shares of Amazon.com fluctuated wildly in heavy trading today after the company reported huge gains in fourth-quarter sales, but cautioned that the increase will not translate into lower net losses in the quarter.

Fourth-quarter revenues were approximately $250 million, fueled by strong holiday season sales.

But the company added that "significant sales of video and music lowered gross margins, as did aggressive product pricing."

Amazon's Chief Financial Officer Joy Covey added that "the strong growth combined with an all-out push to service customers resulted in higher fulfillment expenses."

After dropping more than 7 percent in early trading, Amazon shares rose nearly 8 percent from their opening price before settling back to a 5 percent gain on the day, closing up 6.1875 to 124.50, a 5 percent gain. Amazon's was the most heavily traded U.S. stock today, with 30 million shares changing hands. The company's shares split 3 for 1 today, its second split in the last year.

The company kicked off its holiday shopping season on November 17 and ended it December 31. During that period, Amazon added more than 1 million first time shoppers, and shipped more than 7.5 million items--more than Amazon shipped during the entire year of 1997, according to company figures.

Amazon.com expects to release complete quarter and fiscal year financial results in late January.

"Eventually, we expect the numbers to catch up and justify the current [market] valuation,'' Keith Benjamin, an analyst with BancBoston Robertson Stephens said in a research report. The company will probably have "significant'' losses for the next few years, according to Benjamin, who has a "buy'' rating on the stock.

Amazon.com drew more than 1 million first-time customers between November 17, when it began selling movie videos and gifts such as stuffed toys and personal electronics, and the year's end.

The company's fourth-quarter loss is expected to widen to 54 cents a share, the average estimate of analysts surveyed by First Call, from 7 cents in the year-ago period.

Bloomberg contributed to this report.