April 23 (Bloomberg) -- Amazon.com Inc., the world's largest Internet retailer, said earnings rose on electronics sales and forecast profit margins less than its projection in January, sending the shares lower in late Nasdaq trading.

Operating income in 2008 may be as much as $940 million, less than the $985 million it predicted earlier this year, the Seattle-based retailer said today in a statement. Full-year revenue may climb faster than Amazon.com originally forecast.

Chief Executive Officer Jeff Bezos has added less-profitable groceries, jewelry and exercise equipment and promoted low-cost shipping to lure cash-strapped customers and boost revenue, raising concerns about its short-term earnings goals.

``Amazon continues to turn in better-than-expected revenue growth, but still management is showing little inclination to improve margins,'' said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. ``Everyone's hoping for a margin improvement, but there's no sign that it's on management's agenda right now.'' He recommends investors buy the shares and doesn't own any.

Amazon.com fell $3.90, or 4.8 percent, to $77.10 at 7:38 p.m. New York time after earlier closing at $81 in Nasdaq Stock Market composite trading. The retailer has climbed 14 percent this month.

First-quarter net income increased 30 percent to $143 million, or 34 cents a share, from $111 million, or 26 cents, a year earlier, Amazon.com said. Profit beat analysts' estimates by 1 cent. Revenue climbed 37 percent to $4.13 billion, with international sales helped by the dollar's decline.

Second Quarter

Second-quarter sales may climb to between $3.88 billion and $4.08 billion, Amazon.com said today. The average estimate of 19 analysts surveyed by Bloomberg is for sales of $3.84 billion. Amazon.com forecast operating income of $120 million to $160 million, less than the $195.3 million projected by 15 analysts.

Full-year sales may be $19.1 billion to $20 billion, higher than Amazon.com's prediction of $18.8 billion to $19.8 billion in January.

The difference in its annual operating income forecast stemmed from stock-based compensation, changes in the value of intangible assets and expenses related to its purchase of Audible Inc., which sells audio versions of books and newspapers, Chief Financial Officer Thomas Szkutak said on a conference call with reporters.

First-quarter revenue was driven by low prices and having items in stock, with sales ``very strong across the board,'' said Szkutak. Top-selling categories included electronics, toys, baby products, consumable items, apparel, shoes and jewelry.

Laptops, Watches

Bezos also boosted revenue by offering Web services to programmers, and providing outside merchants with a place to hawk their goods instead of EBay Inc.

First-quarter gross margin, or the percentage of sales after the cost of goods sold, slipped to 23.1 percent of sales from 23.8 percent.

Sixteen analysts estimated average first-quarter profit of 33 cents a share. Twenty-one predicted average sales of $4.08 billion, according to a Bloomberg survey.

Consumers have cut back spending in the face of declining home values, higher food costs and record gasoline prices that surpassed an average of $3.50 a gallon.

`Spend Heavily'

``If the consumer is curbing their spending, they're still continuing to spend heavily with Amazon,'' Joseph Beaulieu, an analyst with Morningstar Inc. in Chicago, said in a Bloomberg Radio interview. ``I do think Amazon's dedication to keeping prices as low as possible definitely has served it well.''

First-quarter sales of books, DVDs and other media increased 28 percent to $2.54 billion, the retailer said. Sales of electronics, jewelry, apparel and other general merchandise climbed 56 percent to $1.48 billion. This category accounted for 36 percent of total sales, up from 31 percent a year earlier.

Sales in the U.S. and Canada climbed 31 percent to $2.13 billion. Revenue at Amazon.com's U.K., German, Japanese, French and Chinese Web sites surged 44 percent to $2.01 billion.

The retailer, founded by Bezos as an online bookseller, added electronic novels and newspapers for download to the Kindle reading device. The products complement the retailer's efforts to expand sales of digital movies and music, where it ranks second behind Apple Inc.'s iTunes, according to market researcher NPD Group.

Lindsay estimates that sales of Web services to developers and downloads of movies and music make up about $100 million in annual revenue. Last year Amazon.com posted sales of $14.8 billion. The retailer doesn't break out specific category information.

``There are some high-growth and high-margin opportunities there, but right now it's nascent and it's small,'' said Lindsay.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.

Last Updated: April 23, 2008 19:43 EDT