Amazon's net revenue grows, profit dips in Q1 saw its revenue grow and exceed Wall St. expectations in its first fiscal quarter of 2005, but net income dropped, the Seattle-based e-commerce retailer announced Tuesday.

Net revenue increased 24 percent to US$1.902 billion in the quarter, which ended March 31, 2005. The consensus expectation from financial analysts polled by Thomson First Call had been for net revenue of US$1.896 billion.

Meanwhile, net income came in at US$78 million, or US$0.18 per share, down from net income of US$111 million, or US$0.26 per share, in 2004's first quarter. Consensus expectation had been for earnings of US$0.23 per share, but a Thomson First Call official said it wasn't clear whether that number compares, in terms of included charges, with the US$0.18 per share reported. Thomson First Call was calling financial analysts at press time to get that cleared up, he said.

The bottom line was hurt primarily by higher taxes. The quarter's net income included an income tax expense of US$56 million, compared with a US$2 million income tax benefit in 2004's first quarter.

Despite the profit drop, Amazon Senior Vice President and Chief Financial Officer Tom Szkutak described the quarter as "successful" and said the company plans to stick to its strategy of continually and aggressively lowering prices across its entire range of products, as well as offering free shipping options.

There was enthusiastic adoption during the quarter of the new Amazon Prime program, which was introduced in February and offers members unlimited two-day shipping, without minimum purchase requirement, for a flat annual fee of US$79, he said.

"Worldwide adoption of free shipping increased again in Q1. Customers saved over US$100 million in shipping through our free shipping offers and Amazon Prime," Szkutak said during a conference call with financial analysts to discuss the quarter's results.

Amazon also plans to continue expanding product selection in existing categories and opening new product categories this year and beyond. "In addition, we'll continue to explore opportunities for geographic expansion in the years to come," he said.

Sales in North America, generated from Amazon's U.S. and Canada Web sites, grew 21 percent to US$1.03 billion, while international sales, generated from Amazon's U.K., Germany, France, Japan and China sites, grew 28 percent to US$875 million, or 24 percent excluding foreign exchange rate benefits. The growth and size of international revenue during the quarter was a source of deep satisfaction, Amazon executives said.

Amazon expects second-quarter net revenue to be between US$1.675 billion and US$1.825 billion, which would represent growth of between 21 percent and 32 percent, compared with 2004's second quarter. For the full year 2005, Amazon expects net revenue of between US$8.175 billion and US$8.675 billion, which would represent growth of between 18 percent and 25 percent compared with 2004.

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