Retailers quaking as Amazon embraces bricks and mortar

Amazon Whole Foods Amazon buys Whole Foods Jeff Bezos John Mackey

Amazon Whole Foods Amazon buys Whole Foods Jeff Bezos John Mackey

Amazon is buying Whole Foods in a deal valued at about $13.7 billion.

"The ramifications for all of retail are seismic - not just retailers that sell grocery, but for everyone", Gordon Haskett analyst Chuck Grom said. (NASDAQ:WFM) on Friday, June 16, and upgraded her rating on the shares from Underperform to Market Perform.

Wal-Mart's stocks fell 4.7 percent when the deal was announced.

Amazon's shares rose 2.4 percent to $987.71, adding $11 billion to its market capitalization, which in one sense makes the acquisition almost free for Amazon shareholders.

The aquisition means that Amazon will have further expanded their competition with major retailer-grocers such as Wal-Mart and Target, in addition to competing with traditional grocers and pharmacies.

Amazon boasts itself as No. 2 on Fortune's 2017 list of World's Most Admired Companies and Whole Foods as No. 28.

Furthermore, most Whole Foods markets are in neighborhoods that are more affluent and younger than America as a whole.

Walmart dropped 5.4 per cent, haemorrhaging $12.9 billion in market value. Certainly, it would appear to Cantillon that Bezos sees the future as slightly more nuanced than the vista of couch-bound online shoppers ordering everything from fast food to films online. Amazon also just launched two grocery pickups kiosks in Seattle that allow its Amazon Prime customers to buy online and pick things up in as little as 15 minutes instead of having them delivered. That prodding irked Mackey, who has referred to Whole Foods as his "baby" and to Jana as "greedy bastards".

Both companies said there will be no layoffs, but they did not respond to other questions about Amazon's plans for Whole Foods.

Headquartered in Austin, Texas, Whole Foods was founded in 1978 and now has more than 460 stores with about 87,000 employees in the United States, Canada and Britain.

On Friday, Whole Foods stock closed up 9.62 to 42.68 per share, a 29.1 percent jump. And the deal expands Amazon's workforce by about a quarter.

Completion of the transaction is subject to approval by Whole Foods Market's shareholders, regulatory approvals and other customary closing conditions.

Shares of Walmart (WMT), the leading US food retailer, and Kroger (KR), the largest traditional operator of supermarkets, tumbled 5 percent and 10 percent, respectively, in Friday trading. Selling produce online is hard.

Amazon and Whole Foods take diametrically opposite approaches to pricing. And it should be able to bring cost-cutting technologies, such as robots to move inventory around, while the company gets a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.

The deal for Whole Foods, however, isn't without risks for Amazon.

Goldman Sachs Group Inc advised Amazon on the deal and provided bridge financing. Walmart, which has the largest share of the USA food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business.

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