Amazon.com Inc. (AMZN - Free Report) has announced plans of opening a new fulfillment center in Ohio.
This is in a bid to further speed up deliveries and expand its presence in the United States.
This news comes on the heels of the company’s closure of the Whole Foods acquisition on Aug 28.Starting today, a selection of best-selling staples from Whole Foods will be sold at lower prices across all its stores, with more getting added in the future. After certain technical integration, Amazon will link its Prime loyalty program with Whole Foods, offering members with special savings and other in-store benefits.
Share Price Movement
Amazon is one of the leading players in the fast-growing retail e-commerce market and its strength lies in its huge scale of offerings, its broad reach and platform approach.
However, Amazon has underperformed the industry on a year-to-date basis. The company’s shares have gained only 26.2% compared with the industry’s gain of 47.8%.
The underperformance can be due to a spike in operating expenses as a result of buildout of fulfillment centers in preparation for the holiday season. The company’s increased spending on original TV shows and movies and offline retail has also been impacting its profits.
More About the New Facility
Fulfillment centers are giant warehouses that help online retailers in storing and shipping products and handling returns quickly.
According to Amazon, the new 855,000-square-foot facility will be developed in partnership with Seefried Industrial Properties. The facility will be build in North Randall where once stood a shopping mall, which was closed in 2009.
The facility will create more than 2,000 full-time jobs. The center will primarily focus on smaller items such as books, electronic devices and children’s toys.
The company already operates two fulfillment centers in Etna and Obetz, Ohio. Currently, it employs more than 4,500 full-time hourly associates at these two centers.
Amazon has been strengthening its presence across the globe. To date, it has created millions of full-time jobs and continues to hire manpower to meet growing customer demand.
We feel, Amazon must maintain its U.S. market share, while expanding globally in order to retain its leading position. For this, the company needs to invest more in fulfillment as well as technology and content, especially in international markets with less penetration and higher growth rates.
Although increased expenses might hurt the company’s bottom line in the near term, we believe this is necessary for the company to maintain its dominance in this highly competitive market.
Zacks Rank & Stocks to Consider
Currently, Amazon has a Zacks Rank #5 (Strong Sell). A few better-ranked stocks in the broader technology sector are Lam Research Corporation (LRCX - Free Report) , Stamps.com Inc. (STMP - Free Report) and PetMed Express, Inc. , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.
Stamps.com Inc. delivered a positive earnings surprise of 30.64%, on average, in the trailing four quarters.
PetMed Express delivered a positive earnings surprise of 10.78%, on average, in the trailing four quarters.
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