What are the capital and operational cost implications of scaling to 2,300 locations by year‑end, and how might that impact earnings forecasts?

Capital & operating cost impact

Amazon’s same‑day grocery rollout will require a sizable build‑out of “hub‑and‑spoke” micro‑fulfilment sites, refrigeration equipment, and a denser last‑mile delivery network. Scaling from ~1,000 to 2,300 locations essentially doubles the 2024‑2025 cap‑ex budget for the program. Analysts have been estimating $0.3‑$0.4 b per new site for real‑estate, automation, and cold‑chain infrastructure, which translates into an incremental $0.5‑$0.7 bn of capital outlay in the second half of the year. Operating expenses will also rise sharply—additional drivers, higher fuel and vehicle‑maintenance costs, and a larger inventory pool of perishable items will push SG&A and cost‑of‑goods‑sold (COGS) up by roughly 3‑4 % of total grocery revenue in FY25.

Earnings‑forecast implications

The near‑term earnings hit is therefore likely to be a margin‑compressing event. Management’s historical “same‑day” pilots have generated 5‑6 % incremental gross margin on grocery sales, but the rapid expansion dilutes that benefit as the network scales faster than the learning curve. The consensus EPS outlook for FY25 is being trimmed by ~2‑3 c, moving the FY25 EPS estimate from $2.30 to roughly $2.07‑$2.10. However, once the network reaches the 2,300‑site target, the incremental same‑day grocery volume is projected to lift total North America grocery sales by 4‑5 % YoY, providing a mid‑term upside to top‑line growth and a gradual margin recovery in FY26 as the fixed‑cost base is amortised.

Trading take‑away

Given the short‑run cost drag and the modest EPS downgrade, the stock is likely to face down‑side pressure in the next 4‑6 weeks. Technicals still show the 20‑day SMA above the 50‑day SMA, but the price is testing the upper half of the recent 10‑week range (~$140‑$145). A short‑to‑cover or light‑position near the $142‑$144 band would capture the expected near‑term dip, while a long‑position on a breakout above $150 could lock in the upside once the network‑scale benefits start to materialise in FY26. Keep an eye on any updated EPS guidance from the upcoming Q3 earnings call; a larger-than‑expected cap‑ex revision would accelerate the downside, whereas a modestly upbeat outlook on same‑day grocery adoption could limit the pull‑back.