Amazon posts modest profits despite healthy sales

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AmazonImage source, Amazon
Image caption,
Amazon's Prime service offers speedier deliveries, as well as access to music and videos online

The online retail giant Amazon has reported weaker profits for the busy Christmas period, but a 15% rise in sales has cheered investors.

The company made a net profit of $214m (£142m) for the last three months of 2014, which is a drop of $25m on the same period in 2013.

However, it was an improvement on the previous quarter, in which Amazon made a net loss of $437m.

The company's shares rose by nearly 8% in after-hours trading.

But despite net sales of $89bn, Amazon made a loss of $241m for 2014 as a whole.

The firm also warned that its finances were "inherently unpredictable".

It sounded a note of caution for the next few months, saying it could make an operating loss of up to $450m.

The web giant added that profits may be "materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce".

Continuing trend

Amazon has become notorious for its lacklustre earnings, and has tended to focus on expanding its business rather than increasing its profitability.

True to form, Amazon's boss, Jeff Bezos, emphasised the success of a new service in the company's results, rather than addressing the firm's figures.

He referred to Amazon's membership scheme, Amazon Prime, as a "one-of-a-kind, all-you-can-eat, physical-digital hybrid", adding that its user base grew by 53% last year.

However other recent projects have not been quite as successful.

Amazon's foray into the smartphone market, with the shopping-focused Fire phone, has hardly been a bestseller, and there have been reports that the tech firm is winding up its mobile payments service.

Most recently, it was forced to shut down its entry into the nappy market just six weeks after launching the initiative.

What is after-hours trading?

Image source, Getty Images
  • When investors buy and sell shares outside the regular opening hours of major exchanges
  • It exists because big financial institutions want to trade large blocks of shares 24 hours a day
  • Adopted in the 1990s by financial institutions and some rich investors; the growth of online trading led to ordinary investors being able to take part a few years later
  • Riskier than trading during regular hours - trading volumes are lower and share prices can be more volatile, meaning the spreads between the buying and selling prices of shares can be wider
  • With less information available it can be harder to work out what's behind some after-hours price movements, leaving small investors at a disadvantage
  • But potential profits can be higher

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