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Can Worker Strike Jeopardize Amazon's Prime Day Prospects?

Zacks Equity Research

Amazon AMZN workers are planning to go on a strike on Prime Day 2019, a significant shopping event, in order to mar the prospects of the company

Reportedly, workers at a Shakopee, MN-based fulfillment center are planning on a six-hour work halt with a three-hour strike at the end of the day shift on Jul 15. Workers intend to repeat the three-hour strike at night shift too. However, this strike coincides with the first day of company’s mega summer shopping event.

Workers are also planning for a rally outside in the afternoon. Notably, workers alleged that poor and unfair working conditions in the company are the primary reasons behind this planned strike.

Notably, the strike will mark the first of its kind as the company has never faced such backlash from workers in the United States during any peak shopping event or season.

This is likely to disrupt Amazon’s initiatives for the Prime Day and is expected to impact the delivery of the bulk of orders during the event. Consequently, this is likely to hurt the company’s performance during the event.

The strike is likely to have a demoralizing effect on investor sentiment.

More on the Allegations & Amazon’s Stance

Amazon continues to face worker reprisal even after its commitment of taking the minimum wage level to $15 per hour.

Demand for safety and benefits are primary reasons behind this strike. Per Bloomberg, some non-Amazon supporters have alleged that some of these workers depend on government aid for their basic requirements like food and healthcare owing to insufficient pay. Meanwhile, the company is benefiting from tax breaks to build warehouses.

Further, workers are also of the opinion that quick delivery of ordered items are creating immense pressure on them and giving rise to insecurity. Many workers have demanded reduction in productivity quotas as this creates an unhealthy atmosphere where they live in constant fear of termination as result of not meeting the benchmark.

They are also demanding for a higher rate of conversion of temporary jobs into permanent ones. Notably, Amazon is facing political pressure which might embolden them further.

However, Amazon has reportedly claimed that the working conditions are better that the industry’s average level. Further, it offers competitive hourly wage which ranges in between $16.25 and $20.80 along with benefits.

Moreover, Amazon is in favor of supporting workers who fail to meet the productivity quotas via coaching sessions. Further, it believes that its production metrics have not changed for over six months.

Additionally, in terms of temporary job conversions, the company converted 30 such positions into Amazon full-time employees at Shakopee fulfillment center recently, thus making 90% of the workers permanent ones at this particular warehouse.

We believe all these initiatives will help the company to maintain position in the market.

Amazon.com, Inc. Revenue (TTM)

 

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. revenue-ttm | Amazon.com, Inc. Quote

Strong Fulfillment Network

Nevertheless, Amazon’s robust fulfillment network which comprises 100 warehouses in the United States is capable of negating the impact of the likely strike significantly.

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

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

All these strong endeavors are expected to help the stock in retaining its momentum among investors.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Retail-Wholesale sector are Alibaba Group Holding BABA, Ctrip.com International Ltd. CTRP and Expedia Group, Inc. EXPE. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Alibaba, Ctrip.com and Expedia is pegged at 26.83%, 15% and 12.28%, respectively.

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