E-books push Amazon's quarterly profits above $10bn for first time

QUARTERLY sales at Amazon have topped $10 billion (£6.3bn) for the first time in the e-tailer's history, but investors were left wary following confirmation that continued investment will eat into earnings.

Amazon, which is now selling more e-books than traditional paper and hardbacks, saw sales rise 36 per cent to $12.95bn (8.2bn) during the final quarter of last year. Profits rose 8 per cent to $416m (261m).

The figures for the crucial Christmas trading period showed that Amazon is continuing to outperform the overall online retailing sector. Amazon said sales would carry on rising at a healthy clip in the first three months of this year, but operating profits would fall by a projected 2 per cent as the company ploughs further cash into expanding its operations.

Amazon, launched in 1995 by founder and chief executive Jeff Bezos, is continuing to invest in new technologies and the expansion of its distribution network.

The company will build at least seven new fulfilment centres this year to handle its growing range of products, which has most recently been augmented by the addition of groceries, pet supplies, musical instruments and lingerie. As a result, analysts project that capital expenditure will more than double to some $851m (535m) this year.

Earlier this month, Amazon announced that it would create 950 jobs at two Scottish fulfilment centres with backing of 2.5m in Regional Selective Assistance and government training grants. These include a new 39-acre site in Dunfermline, which is scheduled to be completed by the end of this year, and the addition of 200 jobs at its existing centre in Gourock.

The company has also been spending on acquisitions, including the recent $317m (199m) deal for the Lovefilm movie rental business.

Fourth quarter revenues in the Seattle company's home North American market rose 45 per cent, driven in large part by sales of its Kindle electronic reader. Since the beginning of this year, Amazon has been selling 115 Kindle books for every 100 conventional volumes. Kindle sales in the UK were said to be following the same trend as in the US, though as usual, Amazon did not provide any specific figures.

Chris North, managing director of Amazon UK, said Kindle was now the British arm's best-selling product of all time.

After Kindle, Amazon UK's best-selling festive item was the DVD of Toy Story 3. On its busiest day in the run-up to Christmas, which fell on 6 December, Amazon UK took orders for more than 2.3 million items.

North said trading had been strong through the period, though December's snow meant that Amazon UK had to warn customers that deliveries would take longer than usual.It was among the raft of online retailers forced to battle through delivery backlogs as a result of severe winter conditions.

Overall sales in the company's international business - which includes the UK, Germany, France, Italy, China and Japan - were 26 per cent higher at $5.74bn (3.6bn).