We have a better sense now of the Amazon effect on Whole Foods. Hint: It's pretty big.
Whole Foods on Friday released its final financial report, which included about one month under new owner Amazon.com Inc. And it put some numbers to the guesswork about how much the attention from Amazon's takeover has helped the grocery chain.
Fourth Quarter Sales
Whole Foods disclosed that sales in its fiscal fourth quarter ended Sept. 24 rose about 4.4 percent from a year earlier. That is the fastest rate of sales growth in two years, according to Bloomberg data, and higher than a Morgan Stanley estimate that figured Whole Foods sales had increased about 3 percent in the September quarter.
It's impossible to know for sure how much of that faster revenue growth happened in the last month of the quarter under Amazon's ownership. But analysts have figured the headlines about Amazon's takeover and attention about the company's selective price cuts on Whole Foods merchandise helped draw in more shoppers. The Amazon halo is quite pretty this time of year.
Bottom Line
For certain, the Amazon takeover was a drag on the bottom line. The gross margin in the September quarter -- that is, revenue minus costs for merchandise and food preparation and store occupancy expenses -- was about 1 percentage point worse than the prior year. That may be the pinch from Amazon's price-cutting.
Including about $153 million in expenses related to the Amazon acquisition, operating income turned negative at Whole Foods in the September quarter. Excluding those costs, Whole Foods turned in about a 2.5 percent operating margin in the quarter. That is skinny by Whole Foods standards but rather nice by Amazon standards. In its September quarter, Amazon's operating margin was 0.8 percent.
Take a nice long look at the Whole Foods financial disclosures because it most likely is the last real look the public will get under the grocery chain's accounting hood. But it already looks as if the Amazon fairy dust has helped.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine
