Amazon faces more than a slowdown in sales growth: it needs more warehouses

July 30 (Reuters) – Amazon.com Inc (AMZN.O) must spend billions of dollars to expand its warehouse and delivery system, adding pressure on its shares which fell 7% on Friday after forecasting a decline in sales growth.

The company is working to meet demand even as buyers venture further outside the home and return to a pre-foreclosure selling trajectory.

Last year Amazon hijacked goods from warehouses for weeks because there was a lack of staff and space to safely fill them. He’s always catching up, said Andrea Leigh, vice president of ecommerce optimization company Ideoclick, who previously worked at Amazon.

“Amazon is running out of available space,” she said. “They are also short of manpower.”

Even after the company has nearly doubled its warehouse and transportation network over the previous 18 months, it is planning significant investments ahead, not to mention the costs of hiring and training staff. A tight labor market forced Amazon to raise wages earlier and add signing bonuses to attract full-time and part-time employees, who now number 1,335,000.

It also needs to get back on track with its target of one-day Prime deliveries to the United States. “This is all part of a multi-year investment cycle for us,” CFO Brian Olsavsky told analysts on Thursday.

For shareholders, Amazon’s spending to capture long-term gains at the risk of short-term profits is in a playbook it has rolled out over 27 years, sometimes testing Wall Street’s patience.

“Slower growth and increased investment make stocks more difficult,” JPMorgan analysts said in a note.

Amazon plans to add 517 facilities to its global distribution infrastructure in the coming years, according to logistics consultancy MWPVL International. That’s 176 million square feet in addition to the 402 million it already has.

Amazon has not commented on the accuracy of those estimates, but said its infrastructure rollout is already ramping up. In the past 12 months, capital spending and equipment rentals have jumped 74% to $ 54.5 billion, almost double the growth rate of a year ago.

That might be normal for a $ 1.7 trillion retailer looking to grow. Credit Suisse analysts said Amazon’s acceleration in capital spending is more important than its revenue forecast.

“The consumer responds positively to higher / faster service levels,” they said in a note. “Unit volume picked up after the launch of Prime 1-Day Delivery in 2Q19 – we think it’s only a matter of time before we see a similar impact as Amazon rolls out assets to ‘execution during the holidays. “

Reporting by Jeffrey Dastin, Danielle Kaye, Chavi Mehta and Subrat Patnaik; Editing by Peter Henderson and Richard Chang

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