Amazon/Whole Foods

Amazon/Whole Foods
October 30, 2017 No Comments Blog Richard Kochersperger
wholefoodsamazon2.jpgPhoto: Whole Foods Market

Whole Foods gives Amazon’s net sales a boost

Expansion, new formats also on the earnings call docket

Dan OrlandoChristine Kapperman | Oct 27, 2017

In its first full segment as part of the Amazon.com Inc. portfolio, Whole Foods Market helped generate nearly 3% of its new parent’s net sales for the third quarter ending Sept. 30.

The Seattle-based e-commerce giant saw 34% growth in net sales as a whole, which translates to $43.7 billion for the quarter as compared to $32.7 billion for the same segment in 2016. In a release announcing the earnings results, Amazon credited $1.3 billion of the sales results to Whole Foods.

Net income was $256 million in the third quarter, or $0.52 per diluted share, a $4 million climb from 2016, which also registered as $0.52 per diluted share.

“We’re really excited to have [Whole Foods] as part of the team now after the acquisition in late August,” said Amazon’s Chief Financial Officer Brian T. Olsavsky during the company’s third quarter earnings call on Thursday.

“I think we’ve had busy months since we’ve joined forces,” Olsavsky added. He pointed to Amazon’s offering of lower prices on a range of “key” grocery items in the stores and its launching the Whole Foods private label products on the website. Amazon Lockers have also been installed at select Whole Foods stores, though this development has caused some friction among co-tenants.

Olsavsky also said that the Prime is slated to become the Whole Foods customer rewards program in the future.

The acquisition of Whole Foods Market gave Amazon a foothold in brick-and-mortar grocery via a company that closed out the opening quarter of 2017—its last full segment before being acquired—up 1.9% in total sales, notching a record $4.9 billion.

However, Whole Foods also endured a 2.4% drop in same-store-sales during Q1. This followed a 2.6% drop at the close of Q4 2016.

Olsavsky commented on the synergy between the two brands and described former Whole Foods CEO John Mackey and his team as “very-like minded with (Amazon), customer-obsessed, ready to work together to continue their mission and expand on their offerings that we can offer customers.”

“So far, so good,” Olsavsky continued while discussing the early stages of the acquisition. “We’re thrilled to finally be working together after the summer of closing the deal.”

Here are a few other learnings from the call:

1. Integration will continue

More integration and “touchpoints” will be visible as Amazon explores ways to serve customers using Amazon Fresh, Amazon Pantry, Prime Now and Whole Foods Markets.

Some may expand and some may become combined.

“There’s no one paradigm for all customer engagement, and we’re looking for the ones that resonate best with customers and we’re going to continue with those,” Olsavsky said.

2. Whole Foods will expand

The CFO confirmed that Whole Foods expansion will occur, but management is not ready to announce what that will look like.

3. Watch for new store formats

“We’re experimenting with a lot of formats,” Olsavsky said. “I think Whole Foods really gives us a vast head start on that and a great base and a great team to work with who has a lot of history. They probably have 10 to 20 years of learnings that we don’t have and wouldn’t have.”

4. Amazon Prime rewards

Amazon Prime will become a platform for a Whole Foods Market customer loyalty program. A timeline was not announced.

What we don’t know:

When asked about adding pharmacies at Whole Food outlets, the CFO answered simply: I cannot confirm nor deny rumors.

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