July 23 (Bloomberg) -- Amazon.com Inc., the world's largest Internet retailer, posted second-quarter profit that exceeded analysts' estimates after consumers bought more toys and video- game consoles and overseas sales soared.

Full-year sales may exceed its previous forecast, Amazon.com said today in a statement. The shares rose 8.4 percent in late New York trading.

Chief Executive Officer Jeff Bezos added electronics and digital-book downloads and promoted free shipping to entice U.S. customers grappling with declining home values and record gasoline prices. Amazon.com's results, as well as growth in Web sales at traditional retailers J.C. Penney Co. and Gap Inc., suggest more shoppers are heading online to buy clothing and televisions.

``Online retail in general is holding up very well,'' said Jeffrey Lindsay, an analyst at Sanford C. Bernstein & Co. in New York. ``For Amazon, it's holding up extremely well. All of the new product categories they are adding is fueling a lot of the growth.'' He recommends buying Amazon.com shares and doesn't own any.

Net income increased to $158 million, or 37 cents a share, from $78 million, or 19 cents, a year earlier, helped by the sale of the company's European DVD rental unit, Seattle-based Amazon.com said.

Revenue increased 41 percent to $4.06 billion from $2.89 billion, Amazon.com said. International sales climbed 47 percent, helped by the dollar's decline against other currencies.

Amazon.com rose $5.89 to $76.43 at 7:34 p.m. New York time in trading after the Nasdaq Stock Market closed. The shares rose 3.8 percent before the earnings release. The stock has declined 24 percent this year after more than doubling in 2007.

Sales Forecast

Full-year sales may rise to as much as $20.1 billion, higher than an earlier forecast of as much as $20 billion, Amazon.com said.

The retailer expects full-year operating income of $745 million to $920 million. In April it predicted operating income of $740 million to $940 million.

Amazon.com has benefited from more rapid growth of Internet purchases compared with total sales. Sales by online merchants increased 14 percent in the first quarter from a year earlier, compared with a 2.8 percent gain overall, according to the U.S. Commerce Department. Second-quarter data will be released next month.

``We don't think we're a good barometer for the economy,'' Chief Financial Officer Tom Szkutak said today during a conference call with reporters.

Operating Income

Gross margin, or profit after the cost of goods sold, dropped to 23.8 percent of sales from 24.3 percent. Margins narrowed on discounts and sales of less-profitable electronics.

Operating income rose 86 percent to $217 million, including a $53 million gain from the sale of the European unit. Amazon.com had forecast operating profit of as much as $160 million, excluding any acquisitions or investments.

``I think it's always going to be a low-margin model,'' Jeffrey Matthews, general partner at Ram Partners LP, a Greenwich, Connecticut-based hedge fund, told Bloomberg Radio. ``They are what they are, it's the model they're in. It's a very efficient business. You sit at your computer and you can pick Amazon or you can pick somebody else.''

Jewelry, electronics, toys, shoes and baby products were among the best-selling items, Szkutak said.

Fifteen analysts surveyed by Bloomberg estimated average profit of 26 cents a share. Eighteen projected average sales of $3.96 billion.

Musical Instruments

Amazon.com sells products in more than three dozen categories, ranging from power tools to musical instruments. Last month, the company opened an office-supplies Web store and bought Fabric.com, which sells material and sewing tools.

Second-quarter sales of books, DVDs and other media increased 31 percent to $2.41 billion, the retailer said. Sales of electronics, jewelry, apparel and other general merchandise climbed 58 percent to $1.53 billion. This category accounted for 38 percent of total sales, up from 34 percent a year earlier.

Sales in the U.S. and Canada rose 35 percent to $2.17 billion. Revenue at Amazon.com's U.K., German, Japanese, French and Chinese Web sites surged to $1.9 billion, or 34 percent excluding currency changes. Overseas sales now account for 47 percent of global revenue, up from 45 percent a year earlier.

Digital Sales

The retailer has expanded digital sales, introducing the Kindle electronic-reading device last year to encourage book, magazine and newspaper downloads. Amazon.com also promoted downloads of movies and music, where it ranks second behind Apple Inc.'s iTunes, according to market researcher NPD Group Inc.

New York Times Co. executives said today during the company's second-quarter earnings call that the newspaper has sold a ``small amount'' of subscriptions on the Kindle.

Amazon.com doesn't release Kindle financial information. During the call with reporters, Szkutak said the company is ``very happy'' with Kindle sales.

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

Last Updated: July 23, 2008 19:36 EDT