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Whole Foods CEO calls deal with Amazon 'whirlwind courtship'

Whole Foods CEO calls deal with Amazon 'whirlwind courtship'”

The surprise deal shakes up the $800 billion grocery sector - and the broader retail industry itself - by marrying Amazon's vast scale and digital prowess with Whole Foods Market Inc.'s 460 stores and fresh-food distribution network. Jana Partners announced in April that it took one.

"Grocery has been pretty insulated from e-commerce to this point", Giammona says. For now, Amazon intends to keep Whole Foods relatively intact by keeping CEO John Mackey in his role and retaining the Whole Foods name.

On the price front, Walmart, Target and Kroger were already feeling pressured. Whole Foods' footprint is far smaller with about 440 locations, though those are mostly in urban and affluent neighborhoods where delivery might be more in demand. The resulting price war has weighed on profit margins.

Before this merger was announced, WFM's valuation had shrunk significantly.

Maybe this acquisition is just the first step and maybe Amazon has other physical supermarket chains on its wish list, maybe even outside of the United States?

Food retailing was once more of a distraction for Amazon: its online grocery business, AmazonFresh, is only available in a handful of cities. The company's NOPAT declined by 8% in 2016 and has fallen 18% over the past twelve months. He describes his company's battle as a "morality play between conscious capitalism and greedy, short-term financial capitalism". If the Amazon deal goes through, that program will be put to the test. For one, it's likely that Whole Foods will actually drop its notoriously high prices.

However, this deal does have some obvious synergies and strategic growth opportunities. There'll be a Whole Foods dream merging in with an Amazon dream.

Whole Foods also might draw a rival offer from one or more large private-equity firms because "there's a tidal wave of money that's sloshing around" in that industry, said Eric Schiffer, chief executive of the Patriarch Organization, a private-equity firm that isn't involved with Whole Foods.

"Whole Foods tends to be in more affluent areas, Target areas, a little more affluent than Walmart is", he said.

Above, the first Whole Foods Market in Austin, Texas.

"Amazon is really good at creating repeat purchases", he noted.

The math on acquisition analysis is very simple when eyed through the economic lens.

Whole Foods 365 offers private-label goods and lower prices than typical Whole Foods stores, and is targeted at younger, value-conscious shoppers. "More generally, if you are a..."

Figure 2 shows the valuation implications of a few other financial scenarios. That might not be the case if Whole Foods was bought by another grocery chain.

The store expanded by buying up other natural food stores across the country such as Detroit's Merchant of Vino stores or Bread & Circus in New England. And it's trying Amazon Go, an experimental Seattle store with no check-out required.

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"Look at companies in the sharing economy".

The market clearly understands this strategy, as the grocery stocks were hit hard Friday. And they're- they're a global company.

Costco executives have acknowledged the company is a tortoise, not a hare, in the online arena, and that its focus is still on getting customers into its brick-and-mortar stores.

With WFM now trading at ~$43/share, the market clearly sees potential for a bidding war.

Whole Foods will eventually be part of Amazon CEO Jeff Bezos's empire.

The stakes are highest for Wal-Mart. But Amazon's larger ambition is likely to turn grocery shopping into a subscription business, according to Dooner.

Wal-Mart may be ready.



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