Amazon Profit More Than Doubles on Lower Tax Rate, Improved Sales's fulfillment center in Fernley, Nevada.
Ben Margot's fulfillment center in Fernley, Nevada.

Online retailer said its quarterly net profit more than doubled and raised its earnings and sales outlook for the year, sending its shares up over 10% after hours.

The company also posted a slight rise in operating margins, allaying some investors' worries about declining margins amid increased investment spending at the company.

The results, which beat both Wall Street's and Amazon's own sales and profit expectations, were boosted by a lower tax rate, a 32% jump in net sales, and wider margins.

"The results were quite strong," said RBC analyst Jordan Rohan. "The company is starting to show some restraint in its spending patterns."

The online retailer said net profit in the first quarter was $111 million, or 26 cents a share, compared with $51 million, or 12 cents a share, a year ago. Total sales rose 32% to $3.02 billion from $2.28 billion.

Analysts, on average, had been expecting earnings of 15 cents per share on sales of $2.92 billion.

Operating income rose 38% to $145 million.

Amazon had projected that operating income in the first quarter would range between $82 million to $122 million, with sales to range between $2.85 billion to $3 billion. The tax rate during the quarter was 23% compared with 47% a year earlier.

Amazon raised its operating income expectations for the full year to between $463 million and $593 million, up from an earlier range of $355 million to $505 million.

"What you're seeing is in some of the key areas we're growing our expenses, but we're leveraging that spend relative to our revenue," Chief Financial Officer Tom Szkutak said on a conference call with reporters.

Amazon also raised its revenue outlook for the year to a range of $13.5 billion to $14 billion from an earlier estimate of $13 billion to $13.7 billion. Analysts, on average, have been expecting revenue of $13.39 billion, according to Reuters Estimates.

For the second quarter, Amazon said it expects net sales of $2.7 billion to $2.85 billion.
Analysts are expecting revenue of $2.69 billion, according to Reuters Estimates.

Operating income is forecast to be between $65 million and $105 million. That target includes $45 million of stock-based compensation and amortization expense.

Amazon also said its board authorized a buyback of up to $500 million of common stock within the next two years.

Shares of Amazon, valued at 48.4 times expected fiscal 2008 earnings, trade at a premium to larger rival eBay , at 21.1 times forward-looking earnings, and Internet businesses like Yahoo and Google .

Shares of Amazon immediately rose over 10% in extended trade to $49.32 after closing at $44.75 on Nasdaq.

Shares also trade at a premium to Wal-Mart Stores , the world's largest traditional retailer whose Web site has been growing in recent years and whose multiple is 15.3.

Rohan said that the large stock move was partly because short-sellers own a large portion of Amazon shares. In a short sale, investors borrow shares and sell them, hoping the price will fall. They profit from buying them back for less than the sale price, and return the shares to the broker.

"There are a lot of investors betting against Amazon. When results are modestly ahead of expectations, those that shorted the stock have to run for the hills," Rohan said.