Amazon.com Inc. (NASDAQ:AMZN) plans to further expand its presence in Michigan by opening another fulfillment center in the Charter Township of Shelby, MI.
Notably, Amazon has underperformed the industry on a year-to-date basis. Shares of the company have gained 31.6% compared with the industry’s growth of 51.3% in the same time period.
More About the Development
The new 1-million-square-foot fulfillment center is expected to create 1,000 new full-time jobs, once the site gets operational in 2018.
This new Michigan facility will focus on large items like household decor, sporting equipment and gardening tools. Amazon stated that employees working in the facility will not only be entitled to get competitive wages, but will also receive other benefits such as generous maternity and parental leaves. The company will also offer 95% tuition reimbursement to its employees.
Meanwhile, Amazon has been increasing its investments to build and modernize fulfillment centers primarily to cut shipping costs and speed up delivery. Amazon already has a huge presence in Michigan. Since 2016, the online retailer has announced three facilities in this region and a corporate office in Detroit. The addition of the new center in Michigan will bring the total workforce count to more than 3,500.
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.
Bottom Line
Fulfillment centers help Amazon in storage and shipping of products, besides handling returns quickly. In fact, these are important for providing the level of services that customers expect from the company.
Additionally, small retailers that 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, 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 negatively impacting its bottom line. Also, Amazon’s retail business is currently facing stiff competition from Alibaba Group Holding Ltd (NYSE:BABA) and eBay Inc (NASDAQ:EBAY), among others.
Zacks Rank & Stock to Consider
Amazon currently has a Zacks Rank #5 (Strong Sell). A better-ranked stock in the broader technology sector is Lam Research Corporation LRCX, sporting 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.
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