Amazon’s Q4 is strong, but crystal ball cloudy

SEATTLE --Retail industry online sales ascended to new heights during the past holiday season and as Amazon.com’s fourth quarter results show it was a key driver of the growth.

The company’s fourth quarter sales increased 36% to nearly $13 billion and its full year sales increased 40% to $34.2 billion. North America fueled the increase with sales that were up in the U.S. and Canada by 45% to $7.21 billion. Profits grew at a slower pace with fourth quarter net income up 8% to $416 million and full year profits up 28% to $1.15 billion.

“We had our first $10 billion quarter, and after selling millions of third-generation Kindles with the new Pearl e-ink display during the quarter, Kindle books have now overtaken paperback books as the most popular format on Amazon.com,” said Jeff Bezos, founder and CEO of Amazon.com. “Last July we announced that Kindle books had passed hardcovers and predicted that Kindle would surpass paperbacks in the second quarter of this year, so this milestone has come even sooner than we expected -- and it’s on top of continued growth in paperback sales.”

Despite the top line performance, expense pressure hindered operating profits which were essentially flat with the prior year’s fourth quarter at $474 million. Full year operating income increased 25% to $1.41 billion.

Looking forward, Amazon.com’s first quarter sales guidance indicates the company isn’t quite sure what to make of economic conditions as it forecast revenues in the range of $9.1 to $9.9 billion and also said it expects operating profits to decline between 2% and 34% to a range of $260 million and $385 million.