Bezos says Whole Foods to shed its pricey image

Bruno Cirelli
Giugno 28, 2017

The moment Amazon announced that is was buying Whole Foods, everyone knew the future of grocery markets had changed. Whilst most companies make concerted efforts to purchase shares to inflate stock price and pay dividends to reward shareholders, Amazon on the contrary, has done quite the opposite; using its high share price to compensate employees to avoid additional cash expenses.

A full transcript follows the video.

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the USA print edition of The Wall Street Journal (June 27, 2017).

Vincent Shen: We've put a little bit of a caveat on some of our statements about whether this deal closes, if the deal ultimately happens.

"From a stock standpoint, while Amazon/Whole Foods will not impact near-term results, it is likely to impact industry trends longer-term, which uncertainty regarding strategic plans for the combined entity and the response from legacy participants, limiting multiple expansion, and share price upside, from current levels".

Amazon, which did not return requests for comment, has not detailed its plans for Whole Foods. Even more ironic is a previous Whole Foods and Azure commitment, according to a November case study published on Microsoft's Web site. That could be incentive enough, this competing play.

Major acquisitions like these can sometimes spark a bidding war.

Adam Levine-Weinberg: I think it's certainly paying a pretty high earnings multiple. Kroger is just gigantic.

Mondelez's comparable sales in North America declined by 1.9% in its most recent quarter. More apparel-focused marketing is one way to do that, or Amazon could acquire another player as struggling retailers look for lifelines. If the deal goes through, those items could get prime real estate on a massive platform outside the chain's 440 US stores. Kroger's stock has just been crushed in the past week. But the quest for dominance goes beyond food. Other deals could follow the Amazon-Whole Foods announcement, with Credit Suisse analysts saying that mergers represent "the path to survival".

Shen: You got a double whammy.

Cory sees limitless growth potential, and he said that's true right now for any company serious about, and good at, last-mile furniture delivery. If the threat is really that large, that raises the question, maybe Kroger should be willing to make a deal here.

While Amazon might reap the benefits from building Whole Foods into an empire that rivals any in the grocery industry, Amazon itself will make sure that Whole Foods will first and foremost remove the "whole paycheck" nickname it has earned from customers over the years.

Amazon "will keep squeezing national brands on pricing", said James Thomson, a former senior manager in business development at Amazon and now partner at brand consultancy Buy Box Experts. The only other logical grocers for them to buy would be Publix or Wegmans, which share all of these attributes, but both of those chains are only in limited geography, while Whole Foods is national, and both Publix and Wegmans are owned by families who are not interested in selling, making the discussion a moot point.

MARGOLIS: Then it's possible that they could build a profile of you where they would recommend things like health-related coupons or items, says Ryne Misso with Market Track.

Amazon has a little more than 3 million square feet of US warehousing dedicated to its existing AmazonFresh and Prime Pantry grocery programs - a tenth of the warehouse space Wal-Mart has for specialized food distribution, according to logistics consulting firm MWPVL International Inc. Others, such as Whole Foods, were upscale specialty retailers that expanded rapidly (Whole Foods now has 460 stores, including one in Lincoln) to chase a growing generation of affluent, urban shoppers. Adam Levine-Weinberg has no position in any stocks mentioned.

Amazon's brick-and-mortar foray into a difficult-to-deliver category such as fresh groceries can easily translate to the furniture industry, where final delivery of online purchase can be complex and expensive to fulfill, said Manoj Nigam, CEO of MicroD, a home furnishings digital technology company. The Motley Fool has a disclosure policy.

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