Oct. 23 (Bloomberg) -- Amazon.com Inc. projected 2008 sales that may be $1 billion less than analysts estimated, suggesting the world's largest Internet retailer isn't immune to a slowdown in consumer spending.

Revenue growth slowed toward the end of the third quarter, ``coinciding'' with disruptions in the financial markets, Chief Financial Officer Tom Szkutak said yesterday during a conference call with investors and analysts. Annual sales will be $18.46 billion to $19.46 billion, Seattle-based Amazon.com said, versus the company's July forecast of as much as $20.10 billion.

Amazon.com's reduced forecast and EBay Inc.'s projection last week for its first quarterly sales decline suggest online retailers won't be spared the effects of the financial crisis on Wall Street, which has hit retailers going into the holiday fourth quarter. The last three months of 2007 accounted for 43 percent of Amazon.com's annual profit.

``They're seeing a slowdown in their business that shouldn't really shock anybody,'' Jeffrey Matthews, a general partner at hedge fund Ram Partners LP in Greenwich, Connecticut, said yesterday in a telephone interview. ``They sell books. They sell movies. They sell blenders. They don't sell magic potions or the fountain of youth.''

Last month, the National Retail Federation said U.S. retailers may post the smallest holiday sales gain in six years as consumers facing rising unemployment and food prices pare spending on non-necessities.

Slower Growth

Amazon.com declined $7.09 to $42.90 yesterday after the close of regular Nasdaq Stock Market composite trading. Earlier, the shares fell 24 cents to $49.99. The stock lost 46 percent of its value through yesterday after more than doubling in 2007.

Full-year revenue won't benefit as much from foreign- exchange rates as predicted in earlier forecasts, Amazon.com said. The average estimate of 21 analysts surveyed by Bloomberg is for annual sales of $19.5 billion.

This year's operating income will be no more than $876 million, excluding about $300 million in costs, compared with a previous high of $920 million, Amazon.com said yesterday in a statement.

``We have limited visibility, as all companies have in this environment,'' Szkutak said on the call.

Amazon.com's sales growth still is outpacing competitors, and its prices and one-stop shopping will attract consumers this holiday season, said Scott Tilghman, an analyst at Soleil Securities Corp.

``They're still beating out the bricks-and-mortar retailers,'' Tilghman, based in Baltimore, said yesterday in a telephone interview. He recommends buying Amazon.com shares and doesn't own any.

EBay Forecast

Fourth-quarter sales may rise to $6 billion to $7 billion, Amazon.com said. Analysts, on average, estimate $7.07 billion. Operating income may fall to as little as $145 million or rise to as much as $305 million.

Net income in the third quarter increased 48 percent to $118 million, or 27 cents a share, from $80 million, or 19 cents, a year earlier. Revenue advanced 31 percent to $4.26 billion, Amazon.com said, less than analysts estimated and the smallest sales gain in two years.

Analysts estimated profit of 25 cents a share, the average of 17 projections in a Bloomberg survey. Twenty analysts estimated average sales of $4.28 billion.

EBay, the world's biggest Internet auctioneer, last week projected its first quarterly sales decline and reduced its annual earnings forecast as growth slows at the company's namesake Web sites. The value of goods sold on EBay's sites fell 1 percent in the third quarter, the first drop in the company's history.

Books, DVDs

Third-quarter sales of books, DVDs and other media on Amazon.com increased 19 percent in the quarter to $2.49 billion, the retailer said. Sales of electronics, jewelry, apparel and other general merchandise climbed 52 percent to $1.64 billion. The category accounted for 38 percent of total sales, up from 33 percent a year earlier.

Amazon.com sells products in more than three dozen categories, ranging from power tools to musical instruments. Last month it started a store selling more than 300,000 motorcycle and ATV parts and accessories.

The retailer has expanded digital sales, introducing the Kindle electronic-reading device last year to encourage book, magazine and newspaper downloads. The service offers 185,000 titles. Kindle sales have ``significantly'' exceeded the company's plans and a new model won't be released before 2009, Szkutak said.

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

Last Updated: October 23, 2008 00:01 EDT