By Bill Rigby and Edwin Chan
SEATTLE (Reuters) - Amazon.com Inc missed Wall Street's estimates for the crucial holiday period and cautioned investors about a possible operating loss this quarter as shipping costs climb, pushing its shares down more than 5 percent.
The world's largest online retailer faced lofty expectations going into one of the most heavily competitive holiday seasons in years, with retailers vying to out-do each other with steep discounts. It was a contest that many retail industry executives have blamed on Amazon.
The Seattle-based company, which has spent freely to forge new markets in cloud computing and digital media, is experiencing slower growth at home after years of rip-roaring expansion, and its international business continues to underperform.
Amazon expects operating results for the current quarter to range from a $200 million loss to a $200 million profit, compared with a $181 million profit a year ago.
To cover rising fuel and transport costs, the company is considering a $20 to $40 increase in the annual $79 fee it charges users of its "Prime" two-day shipping and online media service, considered instrumental to driving online purchases of both goods and digital media.
Amazon has been trying to sustain its pace of growth by investing heavily in retail and distribution networks across the globe, while expanding into the technology realm with Kindle digital devices, cloud computing services and online media.
That has taken a toll on its bottom line. With revenue growth slowing as Amazon achieves unprecedented scale, analysts said investors may be getting impatient.
"Amazon's gotten so many hall passes on earnings," said Colin Gillis, an analyst at BGC Financial, adding that pressure on the company to produce profit is now rising. "Perhaps the market expectations for them to deliver income, as their revenue growth slows" is increasing, said Gillis.
Amazon now has to tread carefully as it ponders a Prime fee-hike, which could boost revenue and earnings but also risks alienating tens of millions of existing customers or discouraging new ones.
Executives said no decision had been made but stressed that they had not touched the fees since Prime's inception.
"When we launched Prime nine years ago, one of the things we hoped for was customers do a lot more cross-shopping, that they would buy more from us," CFO Tom Szkutak told analysts on a post-results conference call.
"And we've seen that trend."
PATIENCE A VIRTUE?
Amazon's growth beyond the United States has struggled amid economic malaise in Europe and parts of Asia. At home, the company is still faring better than its fellow retailers, in part because of a steadily improving distribution system anchored by a growing web of giant warehouses, that helps keep costs down.
Retailers in general faced the most promotional 2013 holiday season since the recession, trying to outdo one another with deep discounts to lure shoppers. That has pressured traditional retail chains such as Sears and Kmart.
Also, Amazon's net shipping costs in the period jumped 19 percent to $1.21 billion.
The company more than doubled net income to $239 million, or 51 cents per share. Analysts had expected 66 cents, on average.
Net sales grew 20 percent to $25.6 billion in the fourth quarter, versus expectations for just above $26 billion and slowing from the 24 percent of the previous three months.
North American net sales in particular grew 26 percent to $15.3 billion, from 30 percent or more in the past two quarters.
International sales rose just 13 percent, below Wall Street expectations.
The company forecast revenue of $18.2 billion to $19.9 billion in the first quarter, a conservative outlook relative to Wall Street's expectation for about $19.7 billion in sales.
Shares in Amazon were down to $382.50, from a close of $403.01 on the Nasdaq. The stock was down more than 10 percent at one point in extended trading.
(Reporting by Bill Rigby and Edwin Chan; editing by Andrew Hay)