Amazon Q2 profit falls 10%, misses Street

Seattle On the heels of its Wednesday announcement that it had agreed to acquire Zappos, Amazon.com said late Thursday that its second-quarter profits fell while sales rose, as the company recorded a $51 million payment to settle a long-standing dispute with former partner Toys “R” Us.

Earnings for the April-June quarter fell 10% to $142 million from the year-ago period.

Sales rose nearly 15% to $4.65 billion, slightly below analyst estimates of $4.69 billion. Amazon's sales were helped last year by a $53 million non-cash gain from the sale of European DVD rental assets.

Sales of books, CDs and DVDs edged up 1.0% to $2.44 billion, and electronics and other general merchandise sales saw a dramatic hike of 35% to $2.07 billion.

North American sales rose 13%, while international sales increased 16%.

CFO Tom Szkutak, in a conference call, provided some financial details regarding Zappos.com Inc., which Amazon said Wednesday it plans to acquire. According to Szkutak, Zappos had about $635 million in revenue last year and a "small profit," he said. Amazon already runs its own shoe and handbag shop, Endless.com, and both will continue to run as separate entities after the acquisition.

For the current quarter, Amazon forecast sales of $4.75 billion to $5.25 billion, in line with analyst estimates for $4.92 billion.

Amazon said in June it agreed to pay $51 million to Toys “R” Us to end a dispute that began in 2004. The company is making the payment in the current quarter but charged it to operating expenses in the just-reported second quarter.

The lawsuit was over a partnership that gave Toys “R” Us exclusive rights to supply some toy products on Amazon's site. Toys “R” Us claimed Amazon violated the partnership by letting others sell some toys on Amazon.com, while Amazon said the toy seller failed to keep items in stock.