Amazon.com’s Sales Rise but Profit Slips

Amazon.com Inc. said Tuesday that earnings fell nearly 35% in the first quarter compared with the same period last year in which the online retailer had a big one-time gain.

But the earnings results met analysts’ expectations, and sales were slightly higher than Wall Street had anticipated.

“They accomplished the most important thing for a retailer in that they sold more stuff,” said Edward Weller at ThinkEquity Partners.

For the three months ended March 31, the Seattle-based company earned $51 million, or 12 cents a share, compared with $78 million, or 18 cents, a year earlier when Amazon.com recorded a one-time gain of $26 million, or 6 cents a share, because of an accounting change.

Sales increased nearly 20%, to $2.28 billion, from $1.9 billion in the first quarter of 2005. The company said sales would have grown 25% if not for a $94-million impact from foreign exchange rates.

Analysts polled by Thomson Financial were expecting earnings of 12 cents a share on revenue of $2.22 billion.

Amazon.com also raised its sales guidance slightly for the full year, saying it now expects to see sales of $9.95 billion to $10.5 billion, up from earlier guidance of $9.85 billion to $10.45 billion.

For the second quarter, Amazon.com said it expected sales of $2.03 billion to $2.18 billion.

Amazon.com also said Tuesday that it would appeal a court decision that terminated its relationship with Toys R Us Inc., in an effort to reinstate the online retailing deal. The company said it was seeking a stay of the termination pending a decision.

A New Jersey Superior Court judge ruled in March that Amazon.com had breached a deal with Toys R Us, allowing the companies to sever the partnership to sell toys online. Amazon.com stands to lose tens of millions of dollars a year in exclusivity fees and other payments from the toy retailer if the 10-year deal signed in 2000 ends early.

Amazon.com warned that if it does not prevail in its legal effort, operating profit could be hurt by as much as $50 million in 2006, including as much as $25 million in the second quarter.