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Amazon (AMZN) Faces Strike Hurdles Before Epiphany in Spain

Zacks Equity Research

Amazon AMZN continues to face workers strike at its warehouses even after the holiday season.

The company’s preparation for the Three Kings gift-giving day has suffered a setback owing to protests by the workers at its biggest warehouse in Spain.

Notably, these workers with the support from two unions namely CCOO and UGT have called for a two-day strike demanding better working conditions and justifiable pay.

Strike to Hurt Amazon

A worker’s strike during the peak shopping time of Epiphany, which is celebrated fervently in Spain by exchanging gifts, does not bode well for an online retailer like Amazon which gives the assurance of fast delivery.

Reportedly, 70% of the Spanish warehouse workers joined the recent strike posing a serious threat to Amazon’s delivery timings.

We note that warehouses are crucial for Amazon as these help in storing and shipping products, and handling returns quickly. With this facility, the company tries to enhance the shopping experience on its e-commerce platform.

Consequently, a delay in the delivery of the items ordered might dissatisfy the customers. Further, customers may stop placing orders on the platform considering the delays owing to the strike. All these are likely to hurt the company’s performance on Epiphany.

The latest move is similar to the step that was taken by Amazon workers at its fulfillment centers and warehouses in the countries namely the U.K., Italy, Germany and Spain on Black Friday.

Amazon.com, Inc. Revenue (TTM)

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Response by Amazon

Meanwhile, Amazon denies the allegations by claiming that the workers are working at better pay and good conditions.

Per Reuters, workers are earning a minimum annual wage of EUR 19,300 at the Madrid warehouse where the latest strike has been called. Comparatively, this figure is way above Spain’s legal monthly minimum wage of EUR 1,050 which comes to EUR 12,600 annually.

Nevertheless, we believe Amazon’s offering of deep discounts on majority of the items, Prime benefits and other customer loyalty offers are likely to aid it in winning the confidence of the customers.

Despite of severe workers’ strikes in European region during the recent holiday season, Amazon reported a record-breaking holiday sales which indicates its reliability.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Facebook FB, TripAdvisor TRIP and Groupon GRPN. While TripAdvisor sports a Zacks Rank #1 (Strong Buy), Facebook and Groupon carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Facebook, TripAdvisor and Groupon is pegged at 21.45%, 14.05% and 3%, respectively.

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