The online retailer,, warns investors of a slow sales growth even with the holiday season inching closer. The firm, which started out as a book seller, said net profits of $30m (£17m) for the three months to September had been hit by a legal settlement.

The announcement was accompanied by a forecast of 13-24% sales growth for the fourth quarter - well below the 31% recorded in the same period of 2004. The news sent Amazon's shares down 8% in after-hours trading.

Despite the slowdown in profits - mostly the result of the $40m cost of settling a patent lawsuit - sales continued to grow during the third quarter, Amazon said. Total revenue was $1.86bn, up 27% - although the 1.6 million copies of the sixth book in the Harry Potter series, the season's big seller, were no more than a "break-even event", Amazon said.

The main driver for revenue was sales of general merchandise and electronic goods, up 43% to $491m. Books, music and other media items still make up almost three quarters of overall sales, however. One concern for analysts was the company's narrow margins.

Amazon said it made an operating profit margin of 6.9%, down from 7.4% a year earlier - a figure which Safa Rashtchy, analyst at Piper Jaffray, warned could slim further in the face of consumer concerns and the impact of rising oil prices on Amazon's spiralling shipping costs.