Amazon makes a big bet in the food business and physical store. The online retail giant announced it purchased a $ 13.7 billion ($ 13.7 billion) organic Whole Foods food outlet ($ 13.298 per US dollar exchange rate assumption) in cash.
The share purchase agreement was around US $ 42 per share or 27 percent of the shares traded on Thursday last week. They said, the Whole Foods store will continue to operate under that name. But as a separate unit of the company.
Whole Foods CEO John Mackey will continue to lead Whole Foods who will maintain its headquarters in Austin, Texas. The deal indicates that this business is interest in the traditional shop business. This happens when retail is paralyze by Amazon’s growth.
This corporate action shows Amazon’s interest in the food business. The company has its own delivery service, Amazon Fresh, and is experimenting with click and collect models, as well as offering customers to buy groceries online, then selecting them directly.
About this Amazon business
Business supermarkets like many other retailers were hit hard by increasing competition from Amazon itself. As a result of the transaction, a number of retail stocks were also among other things Kroger shares fell 13 percent. Target, Costco, Super Value, Sprout also fell. Likewise Walmart shed five percent. Even the company also bought a Bonobos menswear company. Amazon shares, however, rose 3 percent.
Investors do not seem to care about the company’s expenses. Whereas previously there was a warning about the credit downgrade by S & P. It also has no impact on this business. S & P said that Amazon might be owed by the acquisition. However, Amazon has cash of approximately US $ 21.5 billion in the first quarter of 2017, and long-term debt is only US $ 7.7 billion.
The Amazon deal for Whole Foods shows the company’s financial strength led by Jeff Bezos. “Millions of people love Whole Foods Market because they offer the best natural and organic food they make it fun to eat healthy,” Bezos said, as quoted from the CNN Money website on Monday (19/06/2017).
Whole Foods was founded in 1978, and helped push organic food into the mainstream. The company has about 87 thousand employees and more than 460 stores mostly in the United States. However, Whole Foods is also growing in Canada and the United Kingdom.
Companies are also increasingly aggressively moving to big cities, and targeting buyers of the millennial generation. However, the company has constraints due to high prices. Sales growth slowed, and profits have not returned to levels before any high price issues. Then it will be interesting to see Amazon that has a reputation for low prices can change Whole Foods become increasingly affordable.…