Whole foods do not start the Amazon pump
Amazon.com Inc. has asked its big deal for Whole Foods Market Inc. as a way to use physical retail to expand its business, but after the first full year owned by the grocery chain, it does not grow at typical Amazonian levels .
On Thursday, e-commerce giant reported record-high results for the holiday season, but the shares were hurt as expected, and plans to increase investments in 2019 from 2018 level. Shares accounted for almost 5% in subsequent trading.
Fourth quarter 2017 provided the first legitimate annual comparison for Whole Foods within Amazon. The results were not good. Amazon said revenue for its physical stores – consisting of Whole Foods and other efforts like Amazon Go and its pop-up stores ̵[ads1]1; amounted to $ 4.4 billion, 3% less than physical store sales a year ago, before many of the Amazon Other brick and mortar experiments launched.
Read more about Amazon's $ 13.7 billion deal to buy whole foods in June 2017.
Amazon's finance office Brian Olsavsky noted on the conversation that last year for the whole food had five extra days in the quarter , when its fiscal calendar was adjusted to match Amazons. He also noted that online Prime Go orders of Whole Foods groceries picked up in the store are considered online sales rather than physical retail.
"The whole food's growth the year after on apples to apples was about 6%," said Olsavsky, although Amazon did not provide the actual figures to support or control math.
In the fourth quarter, total sales on Amazon increased by 13%. Amazon Web Services revenue increased by 45%. Sales of advertising and other services increased by 95%, which was actually lower than in the previous quarter.
Read more about Amazon's push to e-commerce ads.
No matter how Amazon is trying to spin the numbers, foray in the land of brick and mortar retail is not as impressive compared to other businesses. Amazon has gradually lowered some prices for Whole Foods, to help fight the higher-ended grocery store's reputation as "Whole Paycheck", but according to new research, price falls have not yet arrived.
"I was concerned that the pricing had actually not come down as much as promised and that the competition took the customers' wallet, while employees seemed increasingly dissatisfied or dissatisfied," said Daniel Kurnos, analyst at Benchmark. Retail makes sense, as does whole foods for data collection, Prime adoption and order frequency, but it can be a growth activity for them rather than an arm they can accelerate. "
Before Amazon's results, Kurnos says in a note that he expects the Amazon physical stores will grow at a rate of 5% to a total of $ 18.45 billion by 2019 and a further 5% by 2020 to $ 19.37 billion, which estimates Amazon's total revenue growth in 2019 at about 20.6%.
Amazon took over the chain, Whole Foods founder John Mackey told employees in a video in November that sales have turned course and grown, according to Wall Street Journal. But sales growth in physical stores is poor Compared to the growth of e-commerce, Amazon has only to thank for that phenomenon.
Whole foods should at best be a growing contributor to the vast Amazon landscape, and at worst, a potential surplus. Until Amazon can further cut prices to generate more volume and add more actual stores, it can be so.
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