Five years after buying Whole Foods, the benefits are not in sight
Amazon was supposed to transform the food business with its purchase of Whole Foods for 14,000 million dollars in 2017. But that adventure has not been of much use. With its ecommerce unit still at a loss, it’s hard to see how the brick-and-mortar strategy will help. The company that can seemingly do it all hasn’t cracked those codes yet.
That became even more apparent on Thursday, when the giant said net sales grew 7% year-on-year to $121 billion in the second quarter. Faced with Walmart’s more gloomy prospects, just presented, Amazon’s results made it rise more than 12% in the Stock Market in the aftermarket. But it had operating losses at both its US and international divisions, which includes everything but AWS, its cloud business. That is a turnaround from operating profit in the same quarter of 2021.
Sales at physical stores, made up largely of Whole Foods, rose 12% in the quarter. But part of it looks like a rebound after lockdowns. In the last 12 months, those sales brought in $18 billion, just 6% more than where they were in 2018.
Five years after that operation, Amazon’s transformative capacity seems less Herculean. The WSJ has reported that it is cutting back on its own-brand items as sales are falling. While it’s hard to tell if its Prime business is encouraging people to shop at its brick-and-mortar stores—or, conversely, if stores are encouraging online shopping—its failure to turn a profit isn’t exactly an endorsement.
And it raises questions about other adventures. A partnership with food-delivery GrubHub may allow you to up the deals for Prime members, but that doesn’t matter much if those extra services don’t help the customer. e-commerce to give benefits. The same goes for entering the health sector. Meanwhile, AWS’s operating margins, close to 30%, are strong, with the division contributing only 16% of total sales, but all operating income.
