Whole Foods Is Screwed - InvestingChannel

Whole Foods Is Screwed

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Whole Foods Is Screwed

The other day a Juice staffer was in line at Amazon.com (AMZN)-owned Whole Foods. The following interaction ensued. 

The cashier asked the person at the front of the line, Are you an Amazon Prime member?

The person responded with hell, no! The Whole Foods (and, by corporate association, Amazon employee) said, good answer! 

Our staffer was next. With his phone out and Whole Foods app open, the cashier asked if she could scan his Amazon Prime Membership QR code. Our staffer’s response: Yes. I’m ashamed to admit I’m an Amazon Prime member. 

This story adds credence to anecdotes we hear from across the country. That Whole Foods employees hate working for the company ever since Amazon took over. And they hate Amazon – as an entity – even more than they hate working for Whole Foods. As evidenced by this lackluster customer service. 

Clearly, the Whole Foods-Amazon marriage isn’t working well. As much as we hype Amazon’s ecosystem (and use it as a model to express our love for Uber (UBER) and DoorDash (DASH)), Amazon messed up here. It took on a notoriously rough grocery store business model in exchange, for what, a place for people to pick up and drop off their packages? Makes no sense. 

Further proof: 

  • Whole Foods recently closed its Downtown San Francisco location, after roughly one year, citing safety concerns. While this part of SF has its problems, Whole Foods appears to be using safety as an excuse for its poor decision to locate in an area that simply can’t support another Whole Foods. Sort of like Walgreens (WBA) blaming theft and safety when it closed a bunch of under-performing stores in the same city. 
  • Whole Foods recently took away a perk from Amazon Prime members. If you order grocery delivery from the chain, you’ll pay a $9.95 service fee. 
  • Whole Foods is also laying off several hundred corporate employees, joining parent Amazon who is also slashing jobs. 

The Bottom Line: Here’s a key question. Given the choice, are you shopping at Whole Foods or Trader Joe’s? We’re willing to be an increasing number of people are saying the latter. Because it’s a better and, with inflation a persistent issue, a less expensive option. This does not bode well for Whole Foods or Amazon. 

So, we ask again? What is Amazon getting out of its Whole Foods acquisition? As the dust settles, this feels like a rare bad move by Amazon. A deal that has ended up being more trouble than it’s worth. While this doesn’t mean it’s time to run away from Amazon stock (which is up about 20% YTD), it does mean investors should proceed with caution because, at Amazon, a synergistic ecosystem is everything.

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