Profits down without tax benefit.

While Amazon's overall sales were up 24.3% to $1.9 billion for its fiscal first quarter ending March 31, profits fell compared to the first quarter in 2004, when the company received a tax benefit.

Amazon posted a net income of $78 million for the quarter, or 18 cents per diluted share, versus the $111 million, or 26 cents per diluted share, that the Seattle-based company generated last year on sales of $1.53 billion. The fall in profit was attributed to a $2 million tax benefit last year, versus a $56 million income tax payment this year. Before taxes, the yearly incomes would have been closer with $108 million this year versus $109 million last year.

As part of its results, the company reported that its media product lines grew 17% to $1.37 billion, comprising 72% of total revenue for the quarter. This is in contrast to 77% in the first quarter of 2004. Amazon executives said that this quarter's growth and the 18% increase in media sales in the previous fiscal quarter represent the two largest quarterly increases in the last four years of the company's history.

Within the media category, Amazon reports that it has already received pre-orders for 700,000 copies of "Harry Potter and the Half-Blood Prince," which it will deliver on the July 16 street date.

Back to the company's overall numbers, gross profit grew in the first quarter to $350 million, or 24.3% of total sales. This is in comparison to the $251 million, or 23.6%, it garnered last year. But the company's expense structure also increased to 18.4%, up two percentage points from 16.4% in the first quarter of 2004.

Amazon attributed the increase to a conscious decision to increase investment in technology and content, spending $92 million in the first quarter of this year, versus $58 million last year. That investment is part of an effort to improve the customer experience, executives said during a conference call.

The company's shares closed today at $32.71, down 2.45% from the previous day close of $33.53. This is thought to be in anticipation of weaker profits.