An Amazon First: ProfitAn Amazon First: Profit

Amazon.com Inc. lived up to its promise Tuesday, posting its first profitable quarter on record sales. The Web's largest retailer eked out a net profit for the fourth quarter ended Dec. 31 of $5 million, or 1 cent per share, when tallied by traditional accounting principles. A year ago, Amazon suffered a fourth-quarter loss of $545 million.

The Seattle company also posted a pro forma profit of $35 million, or 9 cents a share, compared with a pro forma loss of $90 million, or 25 cents per share, in the same quarter last year. The profits were driven in part by selling a record $1.12 billion worth of merchandise.

The biggest reason for the turnaround is improved fulfillment processes, Amazon CFO Warren Jenson said during a conference call. Amazon operated two fewer distribution centers this year compared with a year ago and employed 4,000 fewer people in its fulfillment centers. Improved self-service tools reduced customer contacts per order by a third; shoppers contacted Amazon about half as many times about the whereabouts of their orders.

Amazon also reduced the amount of time inventory sat in a warehouse by 38% quarter to quarter, cutting costs further. "Inventory improvements were driven by better allocating inventory across the network," Jenson said.

Net sales for the quarter were 15% higher in the fourth quarter compared with the $972 million recorded a year ago. Sales were helped by Amazon's lowering book prices and an 81% spike in sales in the United Kingdom, Germany, France and Japan, which totaled $262.4 million.