Whole Foods stops growing

[storewanderer]

Correct

I think we also need to recognize that yes, Amazon is a big company, but they're not big where we think they are. AWS is the biggest profit driver and revenue generator as they basically are running more than half the internet and everything from the servers for entire streaming services to the "cloud" platforms for giant corporations.

Retail is big, but again a much smaller percentage of it is actually Amazon than we all realize. They are a marketplace company and better compared to eBay in many regards since they facilitate the transactions but don't actually buy the inventory. The vast majority of the merchandise these days is sold through marketplace vendors and the percentage is growing not shrinking.

So they should be able to acquire a business like Albertsons. Flip side, they could sell Whole Foods and possibly make a slight profit but that all depends on how good (or as we suspect bad) the numbers really are.

But to pretend that Amazon has unlimited cash to keep throwing at money losing retail operations is short sighted. Amazon was already forced to set aside almost a billion dollars because of the faltering Fresh business. When a segment like that becomes unstable they have to admit it to Wall Street and the resulting loss of stock value is many times the value of the segment. So if you're a majority shareholder like Bezos who still calls in regularly to HQ, and you know they can increase stock value by several hundred billion dollars just by spending pennies of stock (not cash!) on a deal like buying Albertsons or another firm, then you're going to push for that deal. The value of fixing the undervalued segment of the business is going to far exceed the cost to fix it. (Or heck the benefit of selling WFM if they decided to cash out would also benefit the stock far more than the sale proceeds if they had to go that way).

I firmly suspect that Amazon was going to be the Albertsons buyer, but then the hubris of Kroger led them to make a preposterous bid where they would grossly overpay. With how few stores actually get acquired versus how many are sold for pennies to C&S the truth is that Kroger is getting such a bad deal that they should not fight when the FTC sues to stop it. Kroger could build a fleet of at least a thousand additional stores to fill in the gaps for less than they're going to pay for Albertsons minus hundreds of divests.

What is interesting is I do not understand why Kroger is scared of Amazon. Kroger is much stronger in so many ways as far as grocery retail and merchandising/procurement/food buying/food manufacturing goes.

Maybe Kroger's end game is to get Albertsons under its fold then sell the entire package to Amazon for some huge payoff?

I still don't think Amazon wants these unionized workforces.

[ClownLoach]

Correct

I think we also need to recognize that yes, Amazon is a big company, but they're not big where we think they are. AWS is the biggest profit driver and revenue generator as they basically are running more than half the internet and everything from the servers for entire streaming services to the "cloud" platforms for giant corporations.

Retail is big, but again a much smaller percentage of it is actually Amazon than we all realize. They are a marketplace company and better compared to eBay in many regards since they facilitate the transactions but don't actually buy the inventory. The vast majority of the merchandise these days is sold through marketplace vendors and the percentage is growing not shrinking.

So they should be able to acquire a business like Albertsons. Flip side, they could sell Whole Foods and possibly make a slight profit but that all depends on how good (or as we suspect bad) the numbers really are.

But to pretend that Amazon has unlimited cash to keep throwing at money losing retail operations is short sighted. Amazon was already forced to set aside almost a billion dollars because of the faltering Fresh business. When a segment like that becomes unstable they have to admit it to Wall Street and the resulting loss of stock value is many times the value of the segment. So if you're a majority shareholder like Bezos who still calls in regularly to HQ, and you know they can increase stock value by several hundred billion dollars just by spending pennies of stock (not cash!) on a deal like buying Albertsons or another firm, then you're going to push for that deal. The value of fixing the undervalued segment of the business is going to far exceed the cost to fix it. (Or heck the benefit of selling WFM if they decided to cash out would also benefit the stock far more than the sale proceeds if they had to go that way).

I firmly suspect that Amazon was going to be the Albertsons buyer, but then the hubris of Kroger led them to make a preposterous bid where they would grossly overpay. With how few stores actually get acquired versus how many are sold for pennies to C&S the truth is that Kroger is getting such a bad deal that they should not fight when the FTC sues to stop it. Kroger could build a fleet of at least a thousand additional stores to fill in the gaps for less than they're going to pay for Albertsons minus hundreds of divests.

What is interesting is I do not understand why Kroger is scared of Amazon. Kroger is much stronger in so many ways as far as grocery retail and merchandising/procurement/food buying/food manufacturing goes.

Maybe Kroger's end game is to get Albertsons under its fold then sell the entire package to Amazon for some huge payoff?

I still don't think Amazon wants these unionized workforces.

I can't figure it out. Kroger is terrified of Amazon; I'm sure I could get a better supermarket than Fresh designed by a classroom of preschoolers armed with crayons. Amazon is stubbornly insistent on becoming a real contender in the grocery world, even though the average Fred Meyer is bringing in more revenue as a store than the entire Fresh chain combined. And Amazon is still looking for distractions from the fact that their onetime dominance of e-commerce for everything is no longer leaps and bounds better than the competition.

This is why one of two things happens. Either Amazon continues on this ridiculous path and has to buy a conventional American grocery chain with close to national coverage (Albertsons, if Kroger concedes makes the most sense). Or Amazon shareholders revolt and say enough wasting money on groceries, this is not a startup company anymore and should not be playing around with money that could pay dividends etc., so they oust the CEO and replace him with someone who will cut all the distractions and refocus on the core business. I still think there was a time when Amazon and Target could have merged (shortly after the WFM acquisition) which would have solved everyone's problems, but we are too far past that now.

[storewanderer]

I can't figure it out. Kroger is terrified of Amazon; I'm sure I could get a better supermarket than Fresh designed by a classroom of preschoolers armed with crayons. Amazon is stubbornly insistent on becoming a real contender in the grocery world, even though the average Fred Meyer is bringing in more revenue as a store than the entire Fresh chain combined. And Amazon is still looking for distractions from the fact that their onetime dominance of e-commerce for everything is no longer leaps and bounds better than the competition.

This is why one of two things happens. Either Amazon continues on this ridiculous path and has to buy a conventional American grocery chain with close to national coverage (Albertsons, if Kroger concedes makes the most sense). Or Amazon shareholders revolt and say enough wasting money on groceries, this is not a startup company anymore and should not be playing around with money that could pay dividends etc., so they oust the CEO and replace him with someone who will cut all the distractions and refocus on the core business. I still think there was a time when Amazon and Target could have merged (shortly after the WFM acquisition) which would have solved everyone's problems, but we are too far past that now.

Kroger got very lucky the COVID era came and caused its pick up service to take off. We don't hear much about the Ocado initiative anymore so that probably tells us how that is going. And from what I see their pick up business is very strong; in some stores they are definitely doing heavier pick up business than Target at the present time is and the other thing I notice with Kroger pick up baskets is those are full baskets of merchandise, very full... unlike Target where I see a lot of very small pick up orders. So I don't really understand why they are so terrified of Amazon if they are really terrified or just give that impression because in my view they've built a far stronger and far more popular grocery platform for online than Amazon has. Plus they have that Vitacost division which probably technically falls under grocery sales as well, however much it sells.

I've been thinking about it more and maybe a good merger partner for Amazon would be Dollar General.

[HCal]

I can't figure it out. Kroger is terrified of Amazon; I'm sure I could get a better supermarket than Fresh designed by a classroom of preschoolers armed with crayons. Amazon is stubbornly insistent on becoming a real contender in the grocery world, even though the average Fred Meyer is bringing in more revenue as a store than the entire Fresh chain combined. And Amazon is still looking for distractions from the fact that their onetime dominance of e-commerce for everything is no longer leaps and bounds better than the competition.

This is why one of two things happens. Either Amazon continues on this ridiculous path and has to buy a conventional American grocery chain with close to national coverage (Albertsons, if Kroger concedes makes the most sense). Or Amazon shareholders revolt and say enough wasting money on groceries, this is not a startup company anymore and should not be playing around with money that could pay dividends etc., so they oust the CEO and replace him with someone who will cut all the distractions and refocus on the core business. I still think there was a time when Amazon and Target could have merged (shortly after the WFM acquisition) which would have solved everyone's problems, but we are too far past that now.

I don't think Kroger is at all scared of Amazon. I think they are just using Amazon as an excuse to convince the FTC to approve the merger. They could say that they need to merge with Albertsons to better compete against Walmart, but saying Walmart and Amazon sounds better.

I am not too familiar with Amazon's financials, but the Fresh store on La Cienega in LA was fairly busy the last couple times I've been there.

Regardless, these physical Fresh stores are such a small piece of the company that they are basically irrelevant. Shareholders aren't going to notice or care. Whole Foods, on the other hand, might be on the radar.

[ClownLoach]

I can't figure it out. Kroger is terrified of Amazon; I'm sure I could get a better supermarket than Fresh designed by a classroom of preschoolers armed with crayons. Amazon is stubbornly insistent on becoming a real contender in the grocery world, even though the average Fred Meyer is bringing in more revenue as a store than the entire Fresh chain combined. And Amazon is still looking for distractions from the fact that their onetime dominance of e-commerce for everything is no longer leaps and bounds better than the competition.

This is why one of two things happens. Either Amazon continues on this ridiculous path and has to buy a conventional American grocery chain with close to national coverage (Albertsons, if Kroger concedes makes the most sense). Or Amazon shareholders revolt and say enough wasting money on groceries, this is not a startup company anymore and should not be playing around with money that could pay dividends etc., so they oust the CEO and replace him with someone who will cut all the distractions and refocus on the core business. I still think there was a time when Amazon and Target could have merged (shortly after the WFM acquisition) which would have solved everyone's problems, but we are too far past that now.

I don't think Kroger is at all scared of Amazon. I think they are just using Amazon as an excuse to convince the FTC to approve the merger. They could say that they need to merge with Albertsons to better compete against Walmart, but saying Walmart and Amazon sounds better.

I am not too familiar with Amazon's financials, but the Fresh store on La Cienega in LA was fairly busy the last couple times I've been there.

Regardless, these physical Fresh stores are such a small piece of the company that they are basically irrelevant. Shareholders aren't going to notice or care. Whole Foods, on the other hand, might be on the radar.

The shareholders aren't going to notice? They impounded nearly A BILLION DOLLARS that would have otherwise been EARNINGS. They definitely noticed. This is not a little plaything anymore. They have blown an incredible amount of money on this money losing operation and had to take out additional debt just to avoid a cash flow crisis. You better believe the investors noticed that a company as huge as Amazon suddenly had liquidity issues. And 100% of it was hung on the retail division.

[HCal]

The shareholders aren't going to notice? They impounded nearly A BILLION DOLLARS that would have otherwise been EARNINGS. They definitely noticed. This is not a little plaything anymore. They have blown an incredible amount of money on this money losing operation and had to take out additional debt just to avoid a cash flow crisis. You better believe the investors noticed that a company as huge as Amazon suddenly had liquidity issues. And 100% of it was hung on the retail division.

For Amazon, a billion dollars works out to about 9 cents per share. That is completely trivial.

Amazon's liquidity issues are due to higher labor and shipping costs in their $200 billion online retail operation, not because of their little chain of 40 supermarkets.

Edit: for context, proportional to the size of the company, Amazon's entire retail operation would be less than one store for Kroger (which isn't exactly a small company either). So I would definitely call it a little plaything.

[storewanderer]

The shareholders aren't going to notice? They impounded nearly A BILLION DOLLARS that would have otherwise been EARNINGS. They definitely noticed. This is not a little plaything anymore. They have blown an incredible amount of money on this money losing operation and had to take out additional debt just to avoid a cash flow crisis. You better believe the investors noticed that a company as huge as Amazon suddenly had liquidity issues. And 100% of it was hung on the retail division.

For Amazon, a billion dollars works out to about 9 cents per share. That is completely trivial.

Amazon's liquidity issues are due to higher labor and shipping costs in their $300 billion online retail operation, not because of their little chain of 40 supermarkets.

That is trivial until it isn't. When isn't it? When they have a surprise earnings miss. When costs suddenly explode. When people cut their buying on Amazon because a lot of the purchases are discretionary and people are running out of money due to all the price increases occurring (wait for 01/2024 when all the insurance price hikes hit everyone). When people cut Amazon Prime because it is "one of those subscription services they can live without."

So sure, it is trivial... they buried it... you are okay with their explanation and note it is only 9 cents a share of loss... for now.

Also they keep throwing money at it... and it keeps floundering. They will probably have to write it down again...

At some point shareholders will demand answers for why the company keeps burning money on these retail operations.

You noted that Fresh unit you went to was busy- did you like the store? How was condition of perimeter? I really like the Long Beach Fresh; it is a nice store, perimeter is in good condition, I like it. But every other Fresh unit I've been into- I strongly dislike. Perimeters are in poor condition, aisles are too narrow, just terrible stores.

[HCal]

You noted that Fresh unit you went to was busy- did you like the store? How was condition of perimeter? I really like the Long Beach Fresh; it is a nice store, perimeter is in good condition, I like it. But every other Fresh unit I've been into- I strongly dislike. Perimeters are in poor condition, aisles are too narrow, just terrible stores.

I didn't care much for the store. Perimeter was meh. Produce seemed limited, dairy was fine, few options for baked items. No pizza or prepared foods available, probably too late in the day. I only bought some packaged goods that were on sale (cereal, snacks, salad dressing, croutons, etc.).

Also, for some reason the cashier refused to let me pay by phone, although tapping a physical card was fine. No idea what that was about, and she seemed irritated so I didn't press the matter.

I haven't been to Long Beach but I'll try to drop by next time I'm in the area.

[storewanderer]

You noted that Fresh unit you went to was busy- did you like the store? How was condition of perimeter? I really like the Long Beach Fresh; it is a nice store, perimeter is in good condition, I like it. But every other Fresh unit I've been into- I strongly dislike. Perimeters are in poor condition, aisles are too narrow, just terrible stores.

I didn't care much for the store. Perimeter was meh. Produce seemed limited, dairy was fine, few options for baked items. No pizza or prepared foods available, probably too late in the day. I only bought some packaged goods that were on sale (cereal, snacks, salad dressing, croutons, etc.).

Also, for some reason the cashier refused to let me pay by phone, although tapping a physical card was fine. No idea what that was about, and she seemed irritated so I didn't press the matter.

I haven't been to Long Beach but I'll try to drop by next time I'm in the area.

Sounds pretty typical. I wonder why the store was busy.

It is a fairly recent upgrade that Amazon Fresh accepts Tap at all so maybe they have some problems.

That is odd behavior from the cashier, I would have tried to tap my phone anyway and see if it would go through. Maybe it declines for some reason. Safeway gas pump has this issue- opposite- you can't tap a physical credit card (debit physical card tapped is okay and it runs through as Visa no PIN/no zip code prompt) but you can tap any card type on your phone.

I purchased at an independent store today and tapped my card and then it gave a debit/credit/ebt/ebt-cash select payment type screen, then after I selected credit it said "enter account number" and the pinpad wanted me to type in my card number. No thanks. I canceled it out and tried to tap again, same thing happened, so canceled again. Then the cashier told me to insert my card. That wouldn't work either. After 3 failed inserts the machine fell back to swipe and cashier told me to swipe my card. I will have to watch that card now. If something strange happens I will highly suspect this store.

[veteran+]

You noted that Fresh unit you went to was busy- did you like the store? How was condition of perimeter? I really like the Long Beach Fresh; it is a nice store, perimeter is in good condition, I like it. But every other Fresh unit I've been into- I strongly dislike. Perimeters are in poor condition, aisles are too narrow, just terrible stores.

I didn't care much for the store. Perimeter was meh. Produce seemed limited, dairy was fine, few options for baked items. No pizza or prepared foods available, probably too late in the day. I only bought some packaged goods that were on sale (cereal, snacks, salad dressing, croutons, etc.).

Also, for some reason the cashier refused to let me pay by phone, although tapping a physical card was fine. No idea what that was about, and she seemed irritated so I didn't press the matter.

I haven't been to Long Beach but I'll try to drop by next time I'm in the area.

I visited that store as well..................................

For me it failed on all fronts. It was like a futile attempt at being a grocery retailer.

I would not shop there if it was next door to me.