Amazon sales outlook falls short as India regulation uncertainly bites

Amazon.com Inc on Thursday forecast first-quarter sales below Wall Street estimates as new regulations in India created uncertainty around one of its key growth markets, even as the online retailer reported record holiday sales and profit.

Shares of the company fell more than 5 per cent to $1,623.90 after the bell, sliding as company officials discussed expenses on a conference call with analysts.

Amazon posted a 63 per cent jump in net income to $3 billion for the fourth quarter, ahead of analysts' estimates. Sales rose 20 per cent, and a record number of shoppers signed up for the company's loyalty club Prime in the fourth quarter. Revenue for Amazon Web Services, the company's lucrative cloud computing business, surged 45 per cent.

Amazon has used fast shipping and exclusive online television shows to attract shoppers, helping maintain its edge as the world's largest online retailer even as competition from rivals like Walmart Inc intensifies. Fees merchants pay Amazon to ship and advertise their products have fattened the company's once-thin profit margins.

Yet investors turned their attention abroad where Amazon has long lost money in the hopes of future profit. Though its operating loss shrunk to $642 million in the quarter from $919 million a year earlier, new regulations in India may hurt Amazon. The rules aim to protect local businesses by disallowing foreign e-commerce companies from selling products via vendors in which they have an equity interest.

Brian Olsavsky, Amazon's chief financial officer, said on a call with reporters, the "situation in India is a bit fluid right now."

"There's a bit of uncertainty," he said, adding that Amazon's goal is to minimize the impact on its customers and sellers. "India remains a good long-term opportunity," he said.

The company began removing a wide array of products from its India website late on Thursday to comply with the new foreign investment curbs that kick in on Feb. 1, Reuters reported.

"The issues in India are taking a toll on the Q1 outlook, even as growth overall slows domestically," said Colin Sebastian, an analyst at Baird Equity Research. "Not a bad report, but there are enough questions where (the) stock will likely be under pressure."