SAN FRANCISCO, Nov 5 (Reuters) – Amazon.com (AMZN.O: Quote, Profile, Research) and eBay (EBAY.O: Quote, Profile, Research) are battling for fashionistas this holiday season, hoping improvements to the tricky, but lucrative art of selling clothes online will translate into bigger sales.

Apparel is today the biggest single sales category online, but it was virtually ignored by both companies in favor of products such as electronics in earlier years.

Although eBay claims it is the largest seller of fashion online, it measures volume, not sales, on its site, so comparisons with Amazon are difficult. Online apparel sales at retailers such as Nordstrom (JWN.N: Quote, Profile, Research) or Gap (GPS.N: Quote, Profile, Research) are growing in the double digits, but those units are still relatively small.

For a graph on online apparel growth click here: r.reuters.com/fef53q

Clothing and accessories are now projected to account for 14 percent, or $25 billion, of the $173 billion in total U.S. online retail spending for 2010, according to Forrester.

“That’s the main reason Amazon and eBay are focusing on it. They see these projections of how large it could be and they want a piece of it,” said Forrester’s Sucharita Mulpuru.

Web commerce experts believe Amazon, the dominant online retailer, is more likely to win the battle, while eBay still tries to revamp its business from an online auctioneer of quirky used goods to a marketplace focused on new merchandise.

SAN FRANCISCO (Reuters) – Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) signaled that the cost of expanding its business would grow at a fast clip during the holiday shopping season, sending shares of the world’s largest online retailer down 3.8 percent.

Amazon is adding fulfillment centers around the world and spending on technology to support its retail and Web services businesses. Those costs will continue throughout the fourth quarter, Chief Financial Officer Tom Szkutak said.

The company has also been spending on television ads for its Kindle electronic reader as it vies with Apple Inc’s (AAPL.O: Quote, Profile, Research, Stock Buzz) popular iPad tablet.

For the fourth quarter, which includes the key holiday shopping period, Amazon said operating income could range from $360 million to $560 million, which could put it in a range from a decline of 24 percent to growth of 18 percent.

“The holidays are a time when you can earn customers, and what we suspect is Amazon has some promotional plans in place to attempt to acquire new customers through either pricing or shipping specials,” said Scott Tilghman, managing director at Hudson Square Research.

“What they might be doing is trading a little (bit) of margin for longer term growth opportunity.”

Amazon has lately been offering free trials for its Amazon Prime discount shipping program, which charges $79 a year for free shipping, in an attempt to capture more repeat customers before the holidays.

SAN FRANCISCO (Reuters) – Amazon.com Inc (AMZN.O: Quote, Profile, Research, Stock Buzz) posted better-than-expected quarterly earnings as revenue rose 39 percent, but its costs rose even faster, and shares in the world’s largest online retailer fell 3.6 percent.

The company, whose shares have been climbing this fall, also gave an operating profit forecast that signaled costs may continue to rise in its key holiday quarter.

“It is still dominating in e-commerce and gaining share across the global retail sector,” said Fred Moran, analyst at Benchmark Co. “But the margins seemed weaker than expected both in the third quarter and in the guidance for the fourth quarter.”

Michael Koskuba, senior portfolio manager with Victory Capital Management in New York, pointed out that Amazon shares had run up significantly since their last earnings report.

“A little sell-off shouldn’t be entirely unexpected,” he said of shares. “The story remains quite strong.”

Net income in Amazon’s third quarter ended September 30 rose 16 percent to $231 million, or 51 cents per share, from $199 million, or 45 cents per share, a year earlier.

Analysts, on average, had been expecting earnings of 48 cents per share, according to Thomson Reuters I/B/E/S.

SAN FRANCISCO (Reuters) – EBay Inc posted a better-than-expected quarterly profit and forecast stronger holiday earnings as the Internet commerce company enjoys robust growth at PayPal while striving to reinvigorate its main marketplaces unit.

The company also raised its full-year revenue and profit forecast and its shares rose 7.3 percent in after-hours trading.

EBay, which began as an online auction house, but sees most of its sales at fixed prices, is in the latter half of a three-year turnaround focused on its marketplaces unit.

The company competes with Amazon.com Inc and a host of e-commerce retailers, all of whom are hoping to appeal to cost-conscious shoppers still pressured by high unemployment and a sluggish U.S. economy.

The company, which also owns PayPal, expects fourth-quarter revenue of $2.39 billion to $2.49 billion, with adjusted earnings per share of 45 cents to 48 cents.

That is above the 44 cents per share on revenue of $2.4 billion that analysts have been expecting, according to Thomson Reuters I/B/E/S.

“This is good across all their businesses,” said UBS analyst Brian Pitz, adding the results and forecast would improve lukewarm investor sentiment toward eBay. “They’re starting to see traction with marketplaces and they expect pretty decent results in the fourth quarter.”

SAN FRANCISCO, Oct 20 (Reuters) – EBay Inc (EBAY.O: Quote, Profile, Research, Stock Buzz) posted a better-than-expected quarterly profit and forecast stronger earnings for the holiday season as the Internet commerce company strives to reinvigorate its main marketplaces unit.

Shares rose 6.2 percent in after-hours trading.

EBay, which began as an online auction house, but sees most of its sales at fixed prices, is in the latter half of a three-year turnaround focused on its marketplaces unit.

The company, which also owns PayPal, expects fourth-quarter revenue of $2.39 billion to $2.49 billion, with adjusted earnings per share of 45 cents to 48 cents.

That’s above the 44 cents per share on revenue of $2.4 billion that analysts have been expecting according to Thomson Reuters I/B/E/S.

Third-quarter net profit was $431.9 million, or 33 cents per share, from $350 million, or 27 cents per share, a year earlier.

Excluding Web telephone unit Skype, which the company sold, earnings were 40 cents per share, above the 37 cents that analysts were expecting, according to Thomson Reuters I/B/E/S.

SAN FRANCISCO (Reuters) – It’s not just death and taxes that are certainties in life. Add Amazon.com’s <AMZN.O high PE for good measure.

Investors eyeing Amazon, the world’s largest online retailer, have had to think twice when contemplating the company’s price-to-earnings ratio, which far exceeds those of rivals in technology and retail. Those who believed in its potential and bought shares a year ago are enjoying a 68 percent return today.

This week, Amazon will again make a case for its growth story even as it stares down fierce competition with the likes of Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) on the retail side and Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz) in its sale of digital media.

Wall Street expects Amazon to report on Thursday that sales more than tripled in its third quarter to $7.36 billion, jump-starting a holiday season the company is again expected to dominate.

“The company continues to operate well and does everything it’s supposed to do,” said RBC analyst Stephen Ju, who rates the company “outperform.” “It’s always been expensive.”

Amazon currently trades at 45.4 times estimated 2011 earnings, compared with a multiple of 14.6 for Apple, 12.2 for Wal-Mart and 14.4 for eBay Inc (EBAY.O: Quote, Profile, Research, Stock Buzz). For a look at Amazon’s key data versus rivals, see: link.reuters.com/juc78p

Bullish investors point to Amazon’s double-digit revenue and growth prospects — from web services to apparel sales.

SAN FRANCISCO/NEW YORK (Reuters) – Gap Inc (GPS.N: Quote, Profile, Research, Stock Buzz) is focusing on finding more sales online and outside its largely mature U.S. market and may expand its lower-priced Old Navy chain outside North America, the apparel retailer said on Thursday.

The company said it expects online and international sales to account for more than 25 percent of net sales by the end of fiscal year 2013, up from 19 percent at the end of fiscal 2009.

Gap, which operates its namesake stores, Old Navy and Banana Republic, said it expects to be in 80 countries by the end of 2010, compared to 25 at the start of the current fiscal year, aided by online sales and third-party deals.

Aside from expansion of the Old Navy chain — a bright spot for Gap that has been enjoying improved sales after a successful turnaround — the company also said it may use its Gap stores opening in China and Italy this fall to spur growth through future outlet stores and online sales in those markets.

Gap, as previously announced, is opening four flagship stores in China next month. It plans to open outlets there in 2012.

The company will also begin to sell online in Japan next year.

In remarks to investors, Gap CEO Glenn Murphy said the market in North America for much of the company’s business is “mature.”

SAN FRANCISCO (Reuters) – The biggest U.S. retail lobby, trying to squelch talk of a national value-added tax, estimated on Wednesday that such a tax could crimp consumer retail spending by $2.5 trillion over the next 10 years.

That reduced spending could hurt gross domestic product, and some 850,000 jobs could be lost in the first year of the tax, said the National Retail Federation report, which was prepared by Ernst & Young and Tax Policy Advisers LLC.

The study assumed a narrow-based VAT of 10.3 percent that could reduce the federal budget deficit by 2 percent.

The concept of a consumption tax, or VAT, has been mentioned by some policy experts as a possible way to reduce yawning budget deficits that have approached 10 percent of GDP in recent years, though few lawmakers in Congress back the idea at this point.

The potential VAT studied in the report would be in addition to applicable state and federal tax.

Just last month, the Organisation for Economic Cooperation and Development noted that the slow recovery from recession in the United States meant that deficit reduction would be gradual. It suggested that savings could rise and deficits be cut through a federal VAT.

The Obama administration has appointed a bipartisan commission to examine how to reduce deficits to sustainable levels, and it is due to report on December 1. Many observers doubt whether the 18-member panel will be able to reach consensus on the painful choices needed to bring deficits down to a sustainable level of 3 percent of GDP.

MEXICO CITY (Reuters) – Mexico’s federal government could join a list of its states suing the companies blamed for the disastrous Gulf oil spill, claiming damage to fishing and tourism, the plaintiffs’ attorney said on Wednesday.

Earlier this month, three Mexican states sued British oil giant BP and its contractors Transocean, as well as affiliated businesses.

The northern state of Tamaulipas — which shares a border with Texas — and Veracruz with its long coastline on the Gulf of Mexico, both said the spill posed risks to beaches and marine life that would cause lost profits and potentially large clean-up bills.

Quintana Roo on the Yucatan Peninsula, home to major tourist destinations like Cancun, also filed suit in a Texas court on September 15.

“We expect the rest of the (Mexican) Gulf states will join the endeavor and potentially … Mexico,” said lawyer Enrique Serna, whose San Antonio-based practice represents the states.

The lawsuits are believed to be the first by foreign governments against the petroleum giant BP and its contractors in the aftermath of April’s Deepwater Horizon rig explosion and ensuing oil spill, Serna said.

More than 300 civil lawsuits have already been filed in the United States by out-of-work rig workers, fishermen and hotel workers, and that number is expected to increase.