Online retailer reported first quarter 2003 pro forma earnings Thursday that beat analyst expectations, citing lowered costs and increased sales.

Amazon reported a first-quarter net loss of US$10 million, or $0.03 per share, compared with a loss of $23 million in the first quarter 2002, or $0.06 per share.

The company reported a pro forma net income of $40 million, or earnings of $0.10 per share, compared with a pro forma net loss of $5 million, or a loss of $0.01 per share for the year-ago quarter. Analysts polled by Thomson First Call predicted earnings of $0.04 a share.

Net sales for the first quarter tallied $1.08 billion, a 28 per cent increase from $847 million for the year-ago quarter.

Amazon said the strategy of driving down costs to give customers lower prices paid off in making this quarter its first non-holiday quarter in which it achieved sales over $1 billion.

The results come on the heels of strong sales reported for the fourth-quarter of 2002, which were pinned on thriving holiday and international sales.

In addition to selling books, CDs, DVDs, apparel, games and other sundry items, the retailer may also be selling domain names in the near future. Amazon acquired accreditation as a domain-name registrar in early March.

The quarter has not been all rosy, however. Earlier in the week the company was hit with a complaint alleging that it violates children's privacy rules. It is unclear how or if the complaint will affect the company, but raises issues as to how the site is perceived by consumers.

Shares of Amazon (AMZN) closed trading down 1.22 per cent to $25.13 on the New York Stock Exchange.