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Amazon to Open New Facility in Germany, Faces Worker Strike (revised)

Zacks Equity Research

Amazon.com Inc. AMZN announced plans to open a new fulfillment center in Germany this year, in order to meet the growing demand in the online shopping space. The facility would be located in the western city of Moenchengladbach.

The company has been spending heavily on new fulfillment centers over the past few years. Fulfillment centers are giant warehouses that help online retailers store and ship products, as well as handle returns quickly. These are important for providing the level of service that customers have started expecting from Amazon.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus

Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote

Regular Strikes in Germany

The company has been expanding presence in Germany. Despite persistent problems, it has opened several fulfillment centers in the country to ensure smooth delivery. The retailer already has 12 fulfillment centers in Germany.

However, it has faced strikes in the country since May 2013, demanding the right for collective bargaining, proper working conditions and regard for their efforts. Amazon expects to have added 2800 workers across Germany in 2019.

The retailer is again facing a strike by German employees in a few of its warehouses, with the beginning of Prime Day.

Amazon's Presseanfragen had this quote on the issue:

“While we don’t provide exact numbers, we are seeing very limited participation across Germany with zero operational impact and therefore no impact on customer deliveries.

"Amazon proves every day that you can be a fair and responsible employer without a collective agreement. In our fulfillment centers, our wages are at the upper end of what is paid in comparable jobs.”

Our Take

Nevertheless, Amazon’s robust fulfillment network of warehouses in Germany is significantly capable of negating the impact of the strike.

This in turn will lessen the impact of the strike on the company’s Prime Day performance. For this event, Amazon’s strengthening initiatives, which are focused on providing enhanced shopping experience backed by robust product offerings, deep discounts on various items and Prime benefits, are likely to aid it in gaining traction among customers.

Further, its automation drive through the use of robots in fulfillment centers is on a high and remains a major positive.

These endeavors of the company are likely to further drive sales in many countries and aid it in winning customers’ confidence.

Zacks Rank & Stocks to Consider

Amazon currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Expedia Group, Inc. EXPE, eBay Inc. EBAY and Ctrip.com International, Ltd. CTRP. While both Expedia and eBay sport a Zacks Rank #1 (Strong Buy), Ctrip.com carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Expedia, Dropbox and Ctrip.com is currently projected at 12.3%, 9.4% and 15%, respectively.

(NOTE; This article has been republished to correct several errors. The original report, posted July 16, 2019, should no longewr be relied upon.)

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