The online retailer crushed the Street’s expectations by snaring customers and snapping up mart share as traditional merchants foundered

By Heather Green

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Being bullish put on Amazon.com proved to have existence a smart bet in the fourth quarter. Even in the manner that traditional retailers founder together the worst relating to housekeeping malaise since the Depression, the pioneering e-tailer under CEO Jeff Bezos is using competitive pricing and an ever-expanding arsenal of services and products to produce better-than-expected results.

In the fourth quarter, Amazon (AMZN) lured customers and gobbled up market share, producing results that crushed Wall Street expectations. Revenue jumped 18% during the quarter, propelled in ample part by overseas shoppers who—though shopping in a less degree—are expenditure more of that shrinking budget online. International sales rose 31%.

"This company is executing flawlessly," says Scott Devitt, an analyst at Stifel, Nicolaus. "Pretty much everything is going well in a surge of disaster, and the market-share gains are unbelievable, in terms of how they are growing, vs. the industry." Net income rose to 52¢ a share on revenue of $6.7 billion, compared with analysts’ expectations of 39¢ a share on $6.4 billion in sales.

Amazon too trumpeted sales of its electronic part reader the Kindle, though it didn’familiarily tell unit or dollar sales. "We are pleased with the demand," Amazon Chief Financial Officer Thomas Szkutak related towards the time of a conference call with analysts and investors. "It exceeded our expectations and we’re excited to see the growth that we’ve seen since we launched it." On Feb. 9, Amazon is due to make one announcement that some analysts speculate will subsist the launch of the next version of the Kindle.

Analysts were also encouraged by Amazon’s projections for the early part of this year, even if the company gave itself wide latitude, since divers had expected a dour sight for 2009. Amazon expects first-quarter sales of $4.53 billion to $4.93 billion, indicating 9% to 19% growth. Analysts were expecting touching $4.55 billion in revenue. Operating income for the same determination is expected to be $125 million to $210 million. That leaves the midpoint at $168 million, a few million in time more analysts’ projections, though not enough for real concern, Devitt says.

Amazon was up front about its reliance on price cuts to win buyers. "It was a very competitive pricing environment," Szkutak said. "One of the reasons you see the growth we provided is because of the pricing."

Yet the results suggest the discounting wasn’t for example deep as some analysts had thought. Concern that the company had slashed prices emerged after Amazon a month ago called the 2008 holiday season its "best evermore." The operating margin, a yardstick of profitability, narrowed to 4% from 4.8% a year earlier, but was notwithstanding 0.5% higher than expected, says Jeffrey Lindsay, an analyst at Bernstein Research. "It looks as if they haven’t had to discount to any (greater) extent that we meditation," he says.

Devitt chalked up the rim pressure to increased expenditure on shipping costs—for incitement, by tegument more products with cheap shipping and signing up more people for Amazon Prime, a program that provides free shipping for customers who liquidate a $79 year-book fee.

Amazon follows Google (GOOG) and Netflix (NFLX) in releasing results that show some pockets of the tech sector are shrugging off the worst of the recession.

Amazon’session results stand in contrast to those of competitor eBay (EBAY). While eBay is the most heavily trafficked online retailer, Amazon is gaining ground. In December, Amazon traffic jumped by 9.8% from a year earlier, while eBay’s traffic dropped 2.5%, according to ComScore (SCOR).

Buoyant results aside, there’s room for the sake of caution. That’s why Amazon gave of that kind a remote range in its growth estimates and didn’t provide a full-year forecast. The full impact of the recession force not be felt until later in 2009.

But likewise if Amazon’sitting sales interpret a bigger-than-expected hit, the company may nevertheless outperform the stay of the industry. Fourth-quarter e-commerce sales slipped 4%, according to ComScore. Traditional deal out in small portions sales dropped 2.8% during the period that includes November and December, according to the National Retail Federation. And this year, the NRF forecasts that traditional retail sales will drop 0.5%.