January 18, 2011, 4:54 PM

Amazon plans a 40% expansion in distribution center space, report says

Amazon could add about 7 million more square feet of fulfillment space in 2011.

Mark Brohan

Research Director

Lead Photo

Amazon’s announcement last week that it was adding more fulfillment space in Scotland is just the start of a big jump in distribution square-footage the world’s biggest web retailer plans to add this year, says a new report from Goldman Sachs Global Investment Research.

In all, Goldman Sachs estimates that Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide will add more than 7 million more square feet of distribution and fulfillment space in 2011, a 40% increase in space that would bring its combined national and international total to 53 centers and 24.5 million square feet. Amazon currently has 22 fulfillment centers in the U.S. and 25 overseas, says Goldman Sachs.

Amazon, which finished 2010 with 17.5 million square feet of distribution space, plans to add six more distribution facilities, including two in Tennessee, two in Japan, one in Scotland and one in South Carolina.

“Larger fulfillment centers for Amazon are more efficient,” says Goldman Sachs analyst James Mitchell, who covers Amazon. “Amazon has generally moved from smaller to larger distribution centers in the U.S. in recent years and now appears to be doing so elsewhere.”

Amazon’s distribution expansion has been particularly aggressive overseas, especially in China. Amazon now has nine distribution centers in China, including four new ones the online retailer opened last year, says Goldman Sachs.

Amazon, which reports its year-end earnings Jan. 27, is adding more space to keep up with strong sales and profits, says Mitchell.

Goldman Sachs makes the following estimates for Amazon’s sales and net income:

  • Sales will total $34.45 billion, up 40.6% from sales of $24.51 billion in 2009.
  • Sales will reach $46.03 billion and $58.39 billion in 2011 and 2012, respectively.
  • Net income will rise year over 24.5% to $1.19 billion from $956 million.
  • Net income will reach $1.78 billion and $2.52 billion in 2011 and 2012, respectively.

 

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