Finance
Amazon: How to offset $3 billion of wage increases, according to Morgan Stanley
“We think improved fulfillment efficiency is set to offset the aforementioned wage increase,” a group of Morgan Stanley analysts led by Brian Nowak wrote in a note sent out to clients on Monday.
By the bank’s calculation, the compensation increase will lift the company’s operating expenses by $2.75 billion, or around 2.5% in fiscal year of 2019. The wage hike is “not small” but “manageable from a profit perspective,” Nowak said.
Since 2016, Amazon has been aggressively investing Kiva robotics integration in its warehouse. These investments have been lifting Amazon’s fulfillment costs per unit in the past two years, but will start to show benefits since the second quarter of this year, according to Nowak.
Morgan Stanley
“We believe these new warehouses are handling the same capacity with around 30% fewer square feet,” Nowak said. “As we refine our fulfillment cost per fulfilled unit analyses we lower pre-wage- increase fulfillment costs by 6% or $2.6 billion in 2019.”
Morgan Stanley
Considering lower fulfillment costs boosted by the efficiency, the unit cost of fulfillment will be flat with the wage increases, Nowak added.
And while the pay hike is manageable for Amazon, Nomura Instinet analyst Simeon Siegel recently said it comes at a cost for employees because Amazon is eliminating restricted stock options and monthly incentive bonuses for hourly workers. And so, if calculating stock and incentive benefits, these employees will actually “lose out” after the new wage change, Siegel said.
Amazon is set to report its quarterly results on October 25. The e-commerce giant is expected to earn an adjusted $5.62 a share on revenue of $57.05 billion, according to Bloomberg data.
Morgan Stanley reiterated its “overweight” rating and $2,500 price target.
Amazon shares were up 50% this year.
Now read:
Markets Insider
Petlibro’s new smart refrigerated wet food feeder is what your cat deserves
Xaira, an AI drug discovery startup, launches with a massive $1B, says it’s ‘ready’ to start developing drugs
Rabbit R1 hands-on review: Something is iffy about this
UK probes Amazon and Microsoft over AI partnerships with Mistral, Anthropic, and Inflection
‘Shōgun’ co-creators break down the finale: ‘It’s a story about death’
Tesla’s new growth plan is centered around mysterious cheaper models
Tesla’s in trouble. Is Elon Musk the problem?
Two widow founders launch DayNew, a social platform for people dealing with grief and trauma
Google Pixel 9 and Pixel 9 Pro: Release date, specs, new features, and other rumors
UnitedHealth says Change hackers stole health data on ‘substantial proportion of people in America’
API startup Noname Security nears $500M deal to sell itself to Akamai
US think tank Heritage Foundation hit by cyberattack
NASA discovered bacteria that wouldn’t die. Now it’s boosting sunscreen.
How to watch ‘Argylle’: When and where is it streaming?
Tesla drops prices, Meta confirms Llama 3 release, and Apple allows emulators in the App Store
Tesla layoffs hit high performers, some departments slashed, sources say
TechCrunch Mobility: Cruise robotaxis return and Ford’s BlueCruise comes under scrutiny
Meta to close Threads in Turkey to comply with injunction prohibiting data-sharing with Instagram
Former top SpaceX exec Tom Ochinero sets up new VC firm, filings reveal
Where’s the AI in these ‘AI-powered’ products for your home?
Petlibro’s new smart refrigerated wet food feeder is what your cat deserves
Xaira, an AI drug discovery startup, launches with a massive $1B, says it’s ‘ready’ to start developing drugs
Rabbit R1 hands-on review: Something is iffy about this
UK probes Amazon and Microsoft over AI partnerships with Mistral, Anthropic, and Inflection
‘Shōgun’ co-creators break down the finale: ‘It’s a story about death’
Tesla’s new growth plan is centered around mysterious cheaper models
Tesla’s in trouble. Is Elon Musk the problem?
Two widow founders launch DayNew, a social platform for people dealing with grief and trauma
Google Pixel 9 and Pixel 9 Pro: Release date, specs, new features, and other rumors
UnitedHealth says Change hackers stole health data on ‘substantial proportion of people in America’
-
Business6 days agoLangdock raises $3M with General Catalyst to help businesses avoid vendor lock-in with LLMs
-
Entertainment6 days agoWhat Robert Durst did: Everything to know ahead of ‘The Jinx: Part 2’
-
Entertainment5 days agoThis nova is on the verge of exploding. You could see it any day now.
-
Business5 days agoIndia’s election overshadowed by the rise of online misinformation
-
Business5 days agoThis camera trades pictures for AI poetry
-
Business6 days agoCesiumAstro claims former exec spilled trade secrets to upstart competitor AnySignal
-
Business7 days agoInternet users are getting younger; now the UK is weighing up if AI can help protect them
-
Business4 days agoTikTok Shop expands its secondhand luxury fashion offering to the UK
