Iconic online bookseller Amazon.com has narrowed its losses and turned in sharply higher sales, crediting a free delivery scheme.

We've lowered prices five times over the last 15 months, and simply put, it's working

Jeff Bezos, chief executive, Amazon

The company said on Thursday that losses for the three months to September came in at $35m (�22.4m), down from $170m during the same period last year.

Sales climbed by one third over the year to $851m, comfortably outstripping the $809m forecast by analysts.

On Wall Street, Amazon shares initially rose in after hours trade, before slipping back to stand $19.01, or 5%, down on Thursday's close.

Into the black?

Analysts believe that the company is on track to turn a profit for the year as a whole provided sales during the all-important Christmas season meet expectations.

Amazon, the world's biggest and best-known online retailer, turned its first ever quarterly profit during the final three months of 2001, helped by strong Christmas sales.

The company said its latest sales figure partly reflected a free delivery programme in the US, where post and packaging is free on orders worth more than $25.

"We've lowered prices five times over the last 15 months and, simply put, it's working," said Amazon chief executive Jeff Bezos.

Amazon's results were also buoyed by strong sales growth in western Europe and Japan.