Amazon.com posted a lower quarterly profit last night as the online retailer racked up higher costs from discount and free shipping programs, increased its technology spending and paid higher taxes.
Amazon shares fell nearly 4 per cent following the results as the company said operating income would drop as much as 42 per cent in the second quarter.
Net income fell to $78 million compared to $111 million in the same quarter of 2004.
"Fundamental trends continue to get weaker," said Mark Mahaney, an analyst at American Technology Research. "Revenue growth decelerated and margins declined."
Revenue rose 24 per cent to $1.90 billion from $1.53 billion, helped by a weak US dollar and the company's fixed-price and free shipping programs. Wall Street analysts had set a revenue target of $1.89 billion. Net sales grew 22 per cent when stripping out the currency impact.
Amazon also vowed to continue cutting prices and stick with its discount and free shipping offers that have helped win customers but have raised fears among investors and analysts about sapping profits.
"Our objective remains offering low prices every day and applying them broadly across our entire product range rather than discounting a small number of products for a limited period of time," Amazon chief financial officer Tom Szkutak said.
The company said its net shipping loss rose 29 per cent to $55 million due primarily to free shipping offers and Amazon Prime - an offer that provides unlimited two-day shipping for an annual fee of $79.
Amazon also said it has received 700,000 pre-orders for Harry Potter and the Half-Blood Prince,the sixth book in the wildly popular series by JK Rowling.
It is priced at a 40 per cent discount and has been the top-selling book for 18 straight weeks, Amazon said.
Shares of Amazon, which closed down 2.5 per cent at $32.71 on Nasdaq, slipped further to $31.57 in after-hours trade.