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Amazon’s big miss and modest outlook

Amazon.com may have achieved record fourth-quarter sales of $25.6 billion, but its top line was well below what analysts expected and so were profits.

The company’s sales increased 20% to $25.6 billion during the fourth quarter ended Dec. 31, compared to $21.3 billion the prior year. Analysts had forecast sales of slightly more than $26 billion. Meanwhile, Amazon said it earned profits of $239 million, or 51 cents a share, well ahead of prior year figures of $97 million and 21 cents a share, but substantially below the 74 cents analysts were expecting.

Fulfillment and marketing expenses weighed on the company’s profitability. Fulfillment expenses increased 29% to $2.9 billion and marketing costs increased 33% to more than $1.1 billion.

Undeterred that sales and profits were less than what others expected and resulted in a massive decline in the stock price after the market closed, Amazon founder and CEO Jeff Bezos said it is a good time to be an Amazon customer.

“You can now read your Kindle gate-to-gate, get instant on-device tech support via our revolutionary Mayday button, and have packages delivered to your door even on Sundays,” Bezos said. “In just the last weeks, Forrester, YouGov, and ForeSee have all ranked Amazon number one, and we believe we’re just scratching the surface of what world-class customer service can be.”

There are plenty of customers who already believe Amazon is tops when it comes to customer service. The company’s full year sales increased 22% to $74.5 billion compared with $61 billion last year and during the holidays access was restricted to the flat rate shipping service branded as Amazon Prime because it is so popular. Despite the huge sales volume, the company’s operating income advanced 10% during 2013 to only $745 million from $676 million. And looking ahead to the first quarter Amazon offered the typically wide range of possibilities and said sales could increase between 13% and 24% to $18.2 to $19.9 billion. Meanwhile, operating profits were forecast to range from a loss of $200 million to a profit of $200 million compared to a gain of $181 million during the first quarter the prior year.
 

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