Bezos will do what he thinks will be good for Whole Foods in five years, while Wall Street watches things like quarterly same store sales.
The company missed its self-imposed deadline of the end of 2015 to expand overseas, and short-selling of the stock increased as investors grew increasingly sceptical over the retailer’s strategy.
A Moody’s analyst described the Amazon-Whole Foods deal as a “transformative transaction, not just for food retail, but for retail in general”.
Founded in Austin in 1978, Whole Foods has 465 stores worldwide and 87,000 employees.
A $48-a-share price tag would be more than reasonable for a fellow retailer that could eliminate overhead at Whole Foods, Short said, while adding that very few companies could outbid Amazon. Food and CPG manufacturers will now need to work more closely with Amazon and leverage their assets, including product innovation, sales/marketing, loyal customers, owned media, etc., and partner with all retailers in their initiatives to drive compelling shopping experience.
It’s no secret that Whole Foods has struggled with its expensive image, aptly captured in its “Whole Paycheck” nickname. By acquiring Whole Foods, Amazon immediately becomes a major beer and wine retailer. The company has also made it increasingly easy for its users to go into just about any store, scan a barcode and compare that retailer’s prices to Amazon’s.
Now that Amazon has shown a willingness to be flexible with its Prime pricing, for instance, offering a less expensive Prime membership for low-income shoppers, “I wouldn’t be surprised if this turned into some sort of Prime option” with special delivery services or a subscription model, he said.
The Seattle-headquartered e-commerce giant is considering replacing Whole Foods cashiers with technology, according to the report.
Amazon’s offer of $13.7 billion, representing a multiple of 10 times earnings before interest, tax, depreciation and amortization, could possibly be raised to 11 or 12 times, according to Kevin Dreyer, co-chief investment officer at Gabelli Funds, which holds Whole Foods shares. Amazon, on the other hand, is working on its Amazon Go checkout-free store formats. In a lengthy profile by Texas Monthly, he says that Goldman Sachs CEO Lloyd Blankfein was eager to court his business when Whole Foods first came under pressure from an activist investor to look for a takeover. Whole Foods, a leader in redefining the modern grocery experience, offers a “produce butcher” at a recently opened store in New York City.
“This might be an opportunity for consumers who have felt that Whole Foods is inaccessible”, said Lauren Beitelspacher, a marketing professor at Babson College in MA. Gartner retail analyst Robert Hetu said Amazon could bring pieces of that to Whole Foods to further cut costs. Amazon shares ended up 0.8 percent at $995.17.