Amazon Q4 profits drop but Kindle sales soar

Online retail giant sees costs increase as it looks to encourage sales, but 2011 turnover grows over 40 per cent

Amazon saw fourth-quarter profits plunge 58 per cent as it fought soaring costs and a tougher battle to get customer wallet share.

The online retail giant experienced a boom in Christmas sales – posting Q4 turnover of $17.43bn (£11bn) – a 35 per cent increase on the $12.95bn posted in the same quarter a year ago.

But costs increased by 38 per cent to $17.4bn as the firm offered sweeteners to customers in the form of free shipping and reduced-cost Kindle devices.

Kindle sales increased a whopping 177 per cent for the nine weeks leading up to Christmas, the firm revealed.

Jeff Bezos, founder and chief executive of Amazon, said: “We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the US and Europe. Our millions of third-party sellers had a tremendous holiday season with 65 per cent unit growth and now represent 36 per cent of total units sold.”

For the full year Amazon saw turnover increase 41 per cent to $48.08bn, compared with $34.2bn in 2010. Net profit for the year dropped 45 per cent to $631m, compared with $1.15bn in 2010.