Amazon Revenue Increases but Still Disappoints

Sales during the holidays lifted the fourth quarter revenue for Amazon.com more than 20% from the previous year’s same period. That helped profit at the online giant, but it did not do enough to meet projections from Wall Street.

The Seattle-based retailer saw its shares tumble in trading after hours on Thursday on its results and on an outlook that disappointed for its current three-month quarter. Amazon announced it could increase its annual fee of $79 for its popular service of two-day shipping by up to $40.

The company increased its expenses over the fourth quarter in part through the hiring of more than 70,000 workers for the holiday season at distribution centers and warehouses in its expectation of big increases in sales.

However, the holiday sales season became marred due to shipping problems with United Parcel Services that caused a number of Amazon customers to have their packages received after December 25 prompting the need for Amazon to issue purchase credits of $20.

Shares at Amazon dropped by 5% or over $20.00 during trading after hours, after falling up to 10%. The stock increased by 63% in 2013.

The faith investors have in Amazon has been in part due to consistent gains in sales that has fueled the lavish spending in the company on internal projects and warehouse construction that has been projected to yield bigger returns down the road.

Sales that were weaker than expected during the holiday season hurt apparel and many other retailers. In November, Walmart warned sales through the month of January would remain flat and it lowered its outlook on profit.

Sears Holding in early January said its sales during the holidays dropped deeply compared to last year during the same period.

Best Buy reported domestic revenue had dropped 1.5% over the holiday period of nine weeks compared to the same period a year ago.

Apparel retailers experienced only slight gains. Gap Inc experienced strong sales during much of 2012, but its comparable store revenue increased only 1% during November and December.

Amazon has recently expanded its grocery delivery service in three cities in the U.S. from just one.

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