Amazon Remains Tight-Lipped About Whole Foods Acquisition, Plans To Ramp Up Fulfillment Real Estate
Amazon has remained tight-lipped since it announced plans to acquire Whole Foods Market for $13.7B, and that did not change during its second-quarter earnings call Thursday evening.
Many in the industry have been waiting with bated breath to gain insight into Amazon’s plans for the high-end grocer and how that fits in with its overall grocery delivery business, but Amazon Senior Vice President and Chief Financial Officer Brian Olsavsky said during the call that the deal is still pending completion and as such insight into the acquisition is unavailable.
“Whole Foods is not included in this guidance since it hasn't closed yet. We are excited about that acquisition and looking forward to working with the team at Whole Foods. They’re very customer-centric like us and have built a great business,” Olsavsky said.
There has been much speculation that the deal will allow Amazon to expand its distribution network. The purchase would give Amazon access to Whole Food’s portfolio of 450-plus stores and put the online retailer close to 75 million Americans who live within three miles of a Whole Foods.
Olsavsky said the growth of its fulfillment centers remains a top priority. Amazon plans to increase its fulfillment square footage globally by 30% this year. In addition to these new deliveries, the company’s foray into physical retail will continue apace as it uses its brick-and-mortar footprint to increase customer’s experience and market its new products.
“We are experimenting with a number of formats. I would say the benefit there is we have curated a selection of titles and a great opportunity for people to touch and feel our devices and see them, especially our Echo devices,” Olsavsky said.
In addition to this, Amazon has been working to strategically expand its one- to two-hour Prime Now delivery services, which are available in 50 cities in eight countries around the world. Customers in select markets can order food or groceries from certain retailers and have those products delivered to their doors within a one-hour to two-hour period.
“We are learning as we go [and] as we grow internationally. That is a service customers love. It’s not an inexpensive service though,” Olsavsky said. “We’re working on the cost of delivery and route densities. We like what we see and we’ll continue to expand that.”
The Richest Man In The World? Not.
The company reported earnings that drastically missed Wall Street analyst estimates, causing shares to fall more than 2% during late trading Thursday.
Amazon’s profits fell 77% in Q2. The company reported quarterly net income of $197M (40 cents/share), and revenue of $38B.
Analysts expected earnings of $1.41/share on sales of $37.2B. As projected, the company’s investment activity ate into its profits, shrinking margins. In addition, the amount of money the company spent to fulfill customers' orders jumped by 33% compared to a year ago, while tech and content spending rose 43%, MarketWatch reports.
Investors have been optimistic about the moves. Amazon’s shares have been trading at record highs this week, reaching an all-time intraday high Thursday of $1,083.31. That activity boosted the company’s market cap and resulted in founder Jeff Bezos temporarily overtaking Microsoft's Bill Gates as the richest man in the world with a net worth nearing $91B, according to Forbes’ real-time billionaire tracker.
That boost did not last long. As last trading fell 2% Thursday, Bezos' net worth dropped back to $88.5B, below Gates’ $89.7B net worth.
