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Amazon.com Inc. (AMZN - Free Report) plans to expand in Baltimore’s Sparrows Point with its fourth Maryland fulfillment center.

For the last few years, the company has been spending heavily on its new fulfillment centers. These are important in order to provide the level of service customers have started expecting from Amazon.

So far this year, the company has underperformed the industry. Shares of Amazon have gained 50.6% compared with the industry’s growth of 60.0%.

More About the New Facility

The latest fulfillment center, spanning more than 855,000 square feet, will be located at 1700 Sparrows Point Boulevard. The four fulfillment centers in Maryland will together account for a total footprint of 3.3 million square feet.

Apart from creating 1,500 new full-time jobs, this new facility will be primarily focusing on the smaller items such as books, electronic devices and children’s toys.

In fact, Amazon has already installed more than 11,500 solar panels on the Baltimore fulfillment centers’ rooftops to focus on the clean energy. These panels generate more than 3.5 MW of combined peak power, thus helping to reduce the amount of electricity drawn from the utility.

Consequently, the online retailer has been increasing its investments to build and modernize fulfillment centers primarily to cut shipping costs and speed up delivery. Currently, the company has three fulfillment facilities in Maryland including two in the Baltimore city limits.

In 2016, Amazon’s capital expenditure increased 51% on a year-over-year basis. A major part of it was utilized in the construction of 26 fulfillment centers and deployment of robotics technology inside them.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus | Amazon.com, Inc. Quote

Bottom Line

Fulfillment centers help Amazon in storage and shipping of products, besides handling returns quickly. In fact, these are important in order to cater its customers’ needs in a better way.

Additionally, small retailers, who are unable to provide relatively cost-efficient shipping, are signing up for Amazon’s fulfillment services. Third parties also avail the company’s warehouses and shipping services. These, in turn, are expected to help the company boost revenues and drive expansion in the long haul.

However, heavy investments in these arrangements (and several other initiatives) are keeping Amazon’s margins under pressure, thereby affecting its bottom line. Also, Amazon’s retail business is currently facing stiff competition from Alibaba (BABA - Free Report) and eBay (EBAY - Free Report) , among others.

Zacks Rank & Stock to Consider

Amazon carries a Zacks Rank #3 (Hold). Another better-ranked stock in the broader technology sector is Groupon, Inc. (GRPN - Free Report) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Groupon are projected to be 10.0%.

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