Online superstore Amazon.com ended its first full year of profitability and upped its sales guidance for the upcoming year.

The company said that low prices and year-round free shipping deals are what have driven its success. "Our commitment to year-round free shipping and lower prices continues to be a win-win for our customers and Amazon.com," said Jeff Bezos, founder and CEO of Amazon. "In addition to purchasing thousands of $29 DVD players this holiday season, customers also bought Tibetan yak cheese, pomegranate molasses and zero carb cheese straws."

The Seattle-based company said that in the last three months of 2003, it earned $73 million, or $0.17 per share, compared to $2.7 million, or $0.01 per share in the same period a year earlier. Quarterly sales came to $1.9 billion, up 36 per cent from the year-ago period and slightly ahead of the $1.869 billion figure predicted by analysts.

Excluding once-off charges, the company matched Wall Street forecasts with earnings of $125 million, or $0.29 per share, compared to $75.4 million, or $0.19 a share a year ago. For the full 2003 year, earnings were $35 million and sales amounted to $5.26 billion.

Still, Amazon shares fell in after-hours trading on Tuesday night. Market watchers chalked the falls up to a disappointment that the strong results were so heavily influenced by the weak US dollar. Currency shifts allowed the firm to add $100 million in international revenue during the fourth quarter, Amazon said. Overall, international sales rose 74 per cent to $804 billion, while North American sales were up 18 per cent to $1.14 billion.

Shares were also weighed down by the company's declining gross margins, now at 22 percent and below expectations. "You should expect to see pressure on gross margins" as Amazon expands and cuts prices, said Financial Officer Thomas Szkutak, in a conference call with analysts and the press.

Looking forward, Amazon raised its 2004 revenue forecast to between $6.2 billion and $6.7 billion, higher than the current forecast from analysts. In late 2003, the company predicted that revenue for the current year would be between $5.75 billion and $6.25 billion. ®