Amazon Buying Whole Paycheck
The Market Ticker - Commentary on The Capital Markets
2017-06-16 09:37 by Karl Denninger
in Company Specific , 676 references Ignore this thread
Amazon Buying Whole Paycheck
[Comments enabled]  

Now this is an amusing deal.

The entire grocery industry is getting monkey-fisted this morning, with losses of anywhere from 5-12+% (Kroger getting it the worst.)

Cramer is, of course, a spittle-tossing lunatic.

The truth is likely to be something else entirely.

Whole Foods has been called whole paycheck for a good long time, and with good reason.  Whole Foods has always been a high cost producer and I have some interesting insights on some of the corporate culture side of things there.  There is zero correlation between how Amazon treats its worker drones (e.g. warehouse employees at all levels) and how Whole Foods treats theirs.

Amazon is ridiculously overpaying for the company (~$42 is, I believe, the deal price, which is ~30% over the closing price yesterday) which is the usual practice for M&A like this.

Let's add one other thing to this: Amazon just made themselves a sales tax collector everywhere since they now have "nexus" in essentially ALL states.  This has not been true (although it's been creeping in one state at a time) but it just went "all 50 at once" for them and is going to result in increased prices for everything Amazon sells, not just groceries.

I'll give you a prediction here: Whole Foods, under Amazon, either loses the only edge it has, which is the "yuppie" factor or it tries to maintain it and margins collapse at Amazon as a whole due to the spend on integration.

My 2-minute analysis?

Bezos just took his walk on water Wall Street treatment and flushed it down the toilet.

Amazon is going to choke on this one folks but now you know why Amazon was handing out EBT reduced price Prime.  They're going to gouge the hell out of EBT card holders at their "newfound" grocery stores.

Bottom line: This is going to, in retrospect, look like the value destruction on the scale of the AOL/Time-Warner deal. 

PS: If you work at Whole Foods you can pass one of these, right?  WFM doesn't currently drug-test everyone -- Amazon does.  Welcome to Amerika associates....

Go to responses (registration required to post)
 
Main Navigation
MUST-READ Selection:
A One-Sentence Bill To Force The Health-Care Issue

Full-Text Search & Archives
Archive Access

Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

 
Comments.......
User: Not logged on
Login Register Top Blog Top Blog Topics FAQ
Showing Page 1 of 4  First1234Last
User Info Amazon Buying Whole Paycheck in forum [Market-Ticker]
Krzelune
Posts: 5713
Incept: 2007-10-08

Report This As A Bad Post Add To Your Ignored User List
I wonder if people with EBT cards will get food for half price.
Goforbroke
Posts: 6973
Incept: 2007-11-30
A True American Patriot!
Drain the Swamp!
Report This As A Bad Post Add To Your Ignored User List
What is of concern to me is the potential of having Amazon in control of the food supply system.

----------
Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
They lose their shirt if they try it. Not gonna happen.

----------
Winding it down.
Ckaminski
Posts: 4081
Incept: 2011-04-08

Mass-Hole!
Report This As A Bad Post Add To Your Ignored User List
Yup, you can't run negative margins forever and there are a LOT of large and small players in the food industry, and Amazon would have to own all or a majority of the distributors as well to make it work.

Not. Going. To. Happen.
Quik49
Posts: 3906
Incept: 2007-12-11

ut
Report This As A Bad Post Add To Your Ignored User List
smiley

where's the popcorn....and don't say it's at wholeturds

----------
Long Vaseline....

Goforbroke
Posts: 6973
Incept: 2007-11-30
A True American Patriot!
Drain the Swamp!
Report This As A Bad Post Add To Your Ignored User List
for 2014 ...

Whole Foods number of stores ... 381
Kroger ... 2,778
Walmart ... 5,109

https://nrf.com/2015/top100-table



----------
Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Tritumi
Posts: 192
Incept: 2008-11-29

tokyo
Report This As A Bad Post Add To Your Ignored User List
Bezos could have purchased one of a number of struggling/failing retail chains, Sears the highest profile. So why Whole Foods? Image, customer profile, locations of outlets, quality of staff?
Jdough
Posts: 78
Incept: 2012-05-04

The Lone Star State
Report This As A Bad Post Add To Your Ignored User List
Amazon is really positioning itself to get on the government gravy train when you look at the EBT effort, whole foods buyout, and the combined contract dough and prospective multi year vendor lock-in from the agency on-premises AWS setups and fedRAMP govcloud. AWS is one of the hot buzzwords / silver bullets at gov agencies right now.

----------
The federal head will possess, without limitation, almost every species of power that can, in its exercise,
tend to change the government, or to endanger liberty; the people will have but the shadow of representation, and but the shadow of security for their rights and liberties
Londoncat
Posts: 86
Incept: 2012-03-02

Kansas
Report This As A Bad Post Add To Your Ignored User List

Wow. Nothing like sinking a boatload of cash into a business with razor thin margins! I guess that lines up nicely with Amazon current business model of "selling at a loss but making up for it with volume!"

Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Whole Foods is a HIGH COST company folks. Bigtime.

The problem is that you can't squeeze the cost out without destroying the product AND service. The snowflake contingent in their stores is INSANE and that on the associate/employee side WILL be "deleted" by Amazon immediately.

What that does to the "meme" of the shopper there is an open question but there's no ****ing way that it will be neutral or positive. The question is whether it's bad or DISASTROUS and collapses the value of the transaction to the point that WFM becomes a literal zero.

----------
Winding it down.
Redbrian
Posts: 19
Incept: 2010-06-25

Report This As A Bad Post Add To Your Ignored User List
Amazon should buy Uber and offer online grocery ordering with home delivery (or skip the Whole Foods acquisition and buy Schwan's instead).

P.S. Can you lengthen your re-verify email address period. I rarely post and often have to re-verify when I do.
Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Quote:
P.S. Can you lengthen your re-verify email address period. I rarely post and often have to re-verify when I do.

You don't have to post, just access the system while signed in at least once every 30 days. If you're reading here regularly you want to be doing so signed on and it won't bother you.

----------
Winding it down.
Eli
Posts: 8506
Incept: 2007-09-10

Report This As A Bad Post Add To Your Ignored User List
My gosh I hate Whole Foods.

The only people who go there enjoy taking it up the ass.

Such over priced crap in there I can't stand the place, it is such a frigging rip off.

----------
If you want a vision of the future, imagine a boot stamping on a human face - forever.
George Orwell

Nevertoolate
Posts: 1307
Incept: 2007-08-26
A True American Patriot!
San Antonio de Bexar de runover with illegals, Texas
Report This As A Bad Post Add To Your Ignored User List
A better move would have been for him to buy UPS. Then he could make a move on Costco. I don't like him and I hope he chokes on this.

----------

Democracy is a conversation between 2 wolves & a sheep discussing what's for dinner. A Constitutional Republic is found when the sheep pulls out a gun & makes clear that his 2nd Amendment Right will be exercised should the wolves attempt to hold such a "vote."-KD 9-29-15
Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Quote:
A better move would have been for him to buy UPS. Then he could make a move on Costco. I don't like him and I hope he chokes on this.

The problem is that UPS has already wrung basically every extra penny out of the distribution system that can be wrung out.

This is an attempt to buy a national distribution chain to yuppies, but the problem with doing it is that they can't keep the "yuppie" meme AND make a profit doing it.

WFM has been having serious margin problems for quite a while and has been taking it out on customers particularly in their "prepared" areas such as the coffee bar and similar. This has resulted in quite-material pushback as the "incredible shrinking package" thing (along with higher prices) have shown up in things like a cup of coffee and the increases in price plus quantity reduction have been INSANE.

What is ALSO being ignored (and just went "poof"!) is that now Amazon will be FORCED to collect and remit tax NATIONALLY, since WFM has markets EVERYWHERE. Currently there are plenty of states where Amazon does NOT have Nexus -- that just went to zero.

----------
Winding it down.
Goforbroke
Posts: 6973
Incept: 2007-11-30
A True American Patriot!
Drain the Swamp!
Report This As A Bad Post Add To Your Ignored User List
Quote:
What is ALSO being ignored (and just went "poof"!) is that now Amazon will be FORCED to collect and remit tax NATIONALLY, since WFM has markets EVERYWHERE. Currently there are plenty of states where Amazon does NOT have Nexus -- that just went to zero.
I didn't think about that. To what extent do you think think this was pushed by the Fed gov't so that states could have increased income and take pressure off the Feds to funnel federal money to them?

----------
Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Squeak
Posts: 630
Incept: 2008-03-15

Report This As A Bad Post Add To Your Ignored User List
AMZN has been collecting sales tax from all 45 states that have a statewide tax since April 1.

This transaction will not change any of that.
Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
April 1st eh? Well we'll see how that winds up hitting their numbers as time goes on...

----------
Winding it down.
Dennisglover
Posts: 637
Incept: 2012-12-05

Huntsville, AL
Online
Report This As A Bad Post Add To Your Ignored User List
I have enjoyed Whole Foods' selection in certain product areas, and have paid their premium simply to buy things I can not get at Publix, Kroger, Target, etc. (Need it be said I avoid Walmart like the plague?)

Okay, now I'll just have to find another source for chicken wings, some produce, and a few spices. No great loss.

Ain't giving Amazon any business.

----------
TANSTAAFL
Rufust445
Posts: 734
Incept: 2007-08-11

Emerald City
Report This As A Bad Post Add To Your Ignored User List
Currently Whole Foods is in a strip mall about 5-6 blocks from here. In nice weather I can walk there on a Saturday about 11:15, and find enough free samples to make a nice lunch. That's about all I visit them for.

Meanwhile, back at the ranch, WF has built a huge new facility a bit farther away, but still within walking distance. Hasn't opened yet as there appears to a lot of interior finishing work to be done. Stay tuned...

----------
"The stock market isn't bullish, it's bull$hit." -- Alan King
Nickdanger
Posts: 631
Incept: 2011-06-12

Report This As A Bad Post Add To Your Ignored User List
I have a good friend that works at WFM in the graphic arts department. They have been asking all employees to cut back on hours because sales have not been as brisk as they would like. Traffic in the WFM stores here have been slower than in the past. Probably due to the economy in general, and the fact that several other grocery stores in the area are now carrying a greater selection of organic stuff at prices less than WFM. This has been going on for quite some time here.

Also, Amazon is supposed to be collecting sales tax on purchases in our state (this was just enacted in April, I believe) but several things I have purchased did not have sales tax added. Does this have to do with things coming from 3rd party sellers?

----------
Grammar: the difference between knowing your **** and knowing you're ****.
Tickerguy
Posts: 148942
Incept: 2007-06-26
A True American Patriot!
Report This As A Bad Post Add To Your Ignored User List
Quote:
Also, Amazon is supposed to be collecting sales tax on purchases in our state (this was just enacted in April, I believe) but several things I have purchased did not have sales tax added. Does this have to do with things coming from 3rd party sellers?

Yes, and that's a dodge that I fully expect will shortly be closed off by legal action. The "agency" argument for doing so (Amazon's "brand" attachment to said offerings) is quite clean.

----------
Winding it down.

Djloche
Posts: 3714
Incept: 2008-07-07

Vancouver, WA
Report This As A Bad Post Add To Your Ignored User List
I don't know what the strategy here is, but it sure seems like a great fit -
two poorly managed companies.

----------
"The Constitution is the IDE. The 2nd Amendment is the debugger."
Imhotep
Posts: 31
Incept: 2013-07-18

United States
Report This As A Bad Post Add To Your Ignored User List
Whole Foods in the area I frequent (Mt Pleasant, SC) is always packed...MILFs/20 somethings in yoga pants...about the only thing I really like when I happen to swing by there.

There's a Trader Joes right down the street that is always packed, too, but their prices are better and the quality is pretty good.
Login Register Top Blog Top Blog Topics FAQ
Showing Page 1 of 4  First1234Last