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Amazon to Deepen Morrisons Alliance, Eyes U.K. Retail Space

Zacks Equity Research

Amazon’s AMZN continued focus toward strengthening relationship with Morrisons is evident of its intention to extend presence in the U.K. retail space.

Reportedly, both the companies are planning to extend their partnership in order to explore opportunities and innovative ways to deliver enhanced shopping experience.

Notably, Amazon already has a supply deal with Morrisons, which enables customers to place orders online with Morrisons and get them delivered at their doorsteps. The orders are then collected by Amazon at Morrisons store for delivery.

We believe Amazon’s strengthening partnership with Morrisons will continue to play a significant role in the company’s UK grocery growth plan.

Aggressive Grocery Plans With Morrisons

Apart from the alliance extension with Morrisons, Amazon plans to roll out Morrisons at Amazon service, which leverages Prime Now delivery capabilities, in cities like Glasgow, Scotland, and Liverpool, England few months ago.

The service is currently available for Prime Now customers in Birmingham, Manchester, Leeds and some parts of London. Further, it is available with an option for delivery within an hour of the order being placed in some locations.

Additionally, Amazon aims to introduce the service in other cities like Newcastle, Sheffield and Portsmouth this year with other locations to be added in the days ahead.

All these endeavors are likely to aid Amazon in rapidly proliferating into U.K.’s food and grocery market, per a report from IGD, and is anticipated to reach £217.7 billion by 2024.

The report also suggests that grocery shopping via online channel is expected to witness strong growth in the U.K.

Further, a report from GlobalData shows that this particular market is likely to see a CAGR of 15.1% between 2018 and 2023.

Amazon.com, Inc. Price and Consensus

 

Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. Price and Consensus

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

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Retail Initiatives to Intensify Competition

All the above-mentioned efforts bode well for Amazon’s growing retail initiatives in U.K. Apart from Morrisons, the e-commerce giant recently revealed its plan to roll out 10 pop-up stores in Britain as part of its pilot project.

Notably, the stores are named as “Clicks and Mortar” selling homeware, health and beauty, food and drink and electronics. The first such store was opened at St. Mary’s Gate, Manchester.

After Manchester, the company is likely to open these stores in Wales, Scotland, the Midlands, Yorkshire and the South East.

We believe Amazon’s expanding physical presence on the back of these pop-up stores are likely to intensify market competition for the local retailers.

Further, the company’s aggressive strategies with Morrisons and robust delivery system of Prime program are expected to provide tough competition to the U.K.’s supermarket retailers like Tesco, Sainsbury's and Asda owned by Walmart WMT.

Zacks Rank & Stocks to Consider

Currently, Amazon Carries a Zacks Ranks #3 (Hold).

Some better-ranked stocks that can be considered in the retail-wholesale sector are Alibaba BABA and Booking Holdings BKNG. While Alibaba sports a Zacks Rank #1 (Strong Buy), Booking Holdings carries 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 Alibaba and Booking Holdings is currently pegged at 28% and 13.40%, respectively.

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