Amazon Profits Fall Despite Revenue Increase 2

Amazon on Thursday reported a 10% drop in profit in the second quarter, due to several unusual items that offset an increase in sales.

Net income for the quarter ended June 30 fell to $142 million, or 32 cents a share, from $158 million, or 37 cents a share, during the same period a year ago. The drop was due to a $51 million charge for a settlement with Toys R Us and a $30 million loss in pretax income from the stronger dollar. In addition, the year-ago quarter included a noncash gain from the sale of Amazon's DVD rental business in Europe.

Revenue rose 14% in the quarter to $4.65 billion, compared to $4.06 billion a year ago. Sales in Amazon's international operations rose 16% to $2.2 billion and North American sales increased 13% to $2.45 billion.

The increase in North American revenues was less than the 21% growth reported in the first quarter, due to declines in some product categories, particularly video games and video-game consoles. The slowdown disappointed investors and Amazon shares fell nearly 7% to $87.40 in after-hours trading, The Wall Street Journal reported.

Nevertheless, Amazon has managed to outpace the e-commerce market as a whole. Despite a weak economy that has forced other retailers to reduce spending, Amazon on Wednesday agreed to pay almost $850 million in cash and stock for shoe retailer Zappos.com.

For the third quarter, Amazon predicted net sales between $4.75 billion and $5.25 billion, which amounts to between 11% and 23% growth from the same period in 2008. Operating income is expected to be from $120 million to $210 million, or between a 22% decline and $36% growth from a year ago.