Amazon.com beats 3Q estimates but sees lower margins ahead

Amazon.com checked in with a smaller-than-expected loss in its third quarter Wednesday, losing $86m (£52m) on sales of $356 (£216.5m). However, rising expenses will crimp profit margins in future quarters.

The £219m in sales represents a 132 percent improvement compared to the year-ago quarter when it lost $24m (£14.5m) on sales of $154m (£93.5m).

In the quarter, Amazon.com added 2.4 million new accounts, bringing its total to 13.1 million accounts, up 190 percent from the 4.5 million accounts it held in the year-ago quarter.

Repeat customer orders accounted for more than 72 percent of total orders in the quarter, up from 70 percent in the second quarter.

"In the third quarter, we announced our new Toys Store, which was immediately recognized by both Forrester Research and MSNBC as the best toy store on the Internet," said CEO Jeff Bezos in a prepared release. "Toys and our other product expansions round out our rich selection and establish Amazon.com as the one-stop holiday shopping destination."

But that expansion will come at a price.

During a conference call with analysts, Bezos said Amazon.com's fourth-quarter gross profit margins would fall between 200 to 300 basis points compared to the third quarter due to increased investment in new services, marketing expenditures and extra personnel to handle the frenetic holiday shopping season.

Bezos said the company will triple its marketing budget from the previous quarter and that operating expenses compared to total sales will remain the same or slightly higher than the third quarter.

Company officials said its US books divsion is on track to be profitable in the fourth quarter and will represent "less than half" of the company's total revenue in the quarter. Going forward, Amazon.com expects it will report some of its new product lines separately, which indicates those new offerings must be gaining momentum.