Amazon Said To Plan Cuts To Shed Whole Foods' Pricey Image

It will take over a natural and organic grocer pioneer with 456 stores, a mecca for young, high-end shoppers, that has been struggling to rein in prices and integrate technology.

After the announcement, Amazon's shares went up more than two percent and Whole Foods Market shares went up by about 28%. This deal will put it on the map of the $700 billion grocery market.

Shares of Amazon rallied 2.4 percent.

The aquisition means that Amazon will have further expanded their competition with major retailer-grocers such as Wal-Mart and Target, in addition to competing with traditional grocers and pharmacies. Its shares closed at $42.68 yesterday, up 29.1 percent.

A Whole Foods Market is pictured in the Manhattan borough of New York City, New York, U.S. June 16, 2017.

Amazon's move is a threat to supermarket chains like Kroger, fresh produce retailers like Sprouts Farmers Market, big-box retailers like Walmart and Target that have moved aggressively into groceries, and companies like Costco that sell bulk products, including food, at discounted prices.

Whole Foods recently overhauled its board and redoubled cost-cutting efforts, seeking to change a high-price image that has tagged it with the nickname "Whole Paycheck".

Amazon could also get a better picture of customers by marrying data from Amazon and Whole Foods' loyalty programs.

The deal has the possibility to be "transformative", Moody's lead retail analyst Charlie O'Shea said in a note, "not just for food retail, but for retail in general".

"Make no mistake, Walmart under no circumstances can lose the grocery wars to Amazon", said Brittain Ladd, a strategy and supply chain consultant who formerly worked with Amazon on its grocery business.

The Times characterized Amazon's latest step as setting up a clash of the titans with Wal-Mart to be the seller of pretty much everything you buy.

In total, those five grocery chains shed about $26.7 billion in market capitalization between the market's close Thursday and Friday morning, as investors anxious that Amazon deeper push into the industry could be a death knell for some.

Amazon would also look to change Whole Foods' inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal, the person with knowledge of the matter said.

Under the Amazon deal, it would continue operating stores under its Whole Foods banner, co-founder John Mackey would remain CEO, and Whole Foods would stay headquartered in Austin, Texas.

Excluding debt, the deal is valued at $13.39 billion. "The checkout-free experience in Go is not yet ready for prime-time as it is still only being beta-tested by AMZN employees, but we believe the Go technology could be rolled out to physical retail, including Whole Foods, over time".

Amazon sent shockwaves through the business community Friday when it announced its purchase of supermarket chain Whole Foods.

Amazon is a beast in the world of online retailers. It has expanded from a book seller into a merchant of almost all consumer products, as well as producing videos.

Whole Foods will run as a wholly independent subsidiary of Amazon. In order for Amazon to get the volume growth they are looking for, fresh foods has to be part of the equation.

Whole Foods' conversations with banks took place before the company was approached by Amazon, so Goldman was also vying for a role with Whole Foods.

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