re: Amazon buying Whole Foods

Whole Foods has been around since the 80's but only started their growth spurt in the 90's. It now has 450 +/- stores throughout the US.

A significant number of those stores and warehouses have leases that were negotiated 15-20 years ago and are at a significant discount to current rents. More importantly, WF has a ton of A+ real estate. So if the entire grocery concept falls apart for Amazon WF is one of the best real estate plays over the past 20 years. Let Walmart and others have the very limited "organic" market and go play real estate monster. And make billions more for Jeff..

Fun times in the financial and real estate world.

quote:

---

Love 365 products. Can't wait to get them cheaper and prime to my door

---

It makes sense this is definitely part of the play. Why not deliver your own product instead of others? Makes sense.

100%

I could see them also getting into the Blue Apron, Plated, Hello Fresh market as well.

They already have the delivery structure down, now they have access to the fresh produce/protein.

Simply responding to WM's move in the Jet Acqusition and going all in to compete against them. The perfect and natural, logical response for Bezos tbh.

The way these two companies are positioning to go at each other over the next 5-10 years for the American Consumer is going to yield some interesting, no doubt amazing results. I'm so interested to see what happens.

quote:

---

UltimaParadox

---

quote:

---

They lease all of their stores

---

Not totally true-most of their stores are leased but they do own some properties:
In the 2016 annual report:

quote:

---

As of September 25, 2016, we operated 456 stores: 436 stores in 42 U.S. states and the District of Columbia; 11 stores in Canada; and 9 stores in the U.K. We own 18 stores and three distribution facilities. We also own four properties leased to third parties; a building on leased land, which is leased to third parties; and a parking facility on leased land. All other stores, distribution centers, bakehouses and administrative facilities are leased, and we have options to renew most of our leases in five-year increments.

---

Most big box retailers (Walmart, Target, most grocery stores, etc) lease their buildings but try to retain control of their facility over a long period of time (15-50 years) through long-term initial leases and multiple renewal options.

I'm sure there's a mixed bag of leases in the portfolio. Some of the older leases, especially if they are in big metro areas (SF, NYC, LA, etc.) are worth their weight in gold for subleasing at a considerable upside over the existing lease terms. They also have some newer leases that are at or above market rates but could be dumped back onto the market with minimal gain/loss. The big issue becomes retrofitting a grocery store into a non-grocery use. Those redevelopments are notoriously expensive.

Additionally adding the distribution centers make a lot of sense also. Industrial vacancy rates, especially for spaces 200,000 s.f and larger, are less than 5% in most major markets and essentially zero % in some markets.

TL/DR: As a real estate play only this opens up a huge financial opportunity for Amazon.

Interesting. And then you have the likes of Macys / Sears that own a sizable portion of their portfolio.

WF more than anything probably has a brand advantage when negotiating new leases. They typically spur the rest of the development and are known to attract a higher end customer which most property owners obviously prefer.

The difference tho is that Walmarts are massive and can support the amount of goods/storage needed to handle large operations like that. Does Whole Foods have the space (both front and boh) to do anything other than what they are doing today? Or will they have the system so seamless that the space won't matter and basically the good will be on a truck before it interferes with business?

I was thinking about how WMT could respond here. Analyst opinions of Amazon buying WF and WMT buying Bonobos was "Chess vs Checkers". Thinking big picture and submitting my knee jerk reaction, I think WMT needs to go ahead and try to buy Netflix and/or UPS/FDX and here's why:

1) Compete with Prime: Original Video Content, Potential Sams Club synergies, shipping/distribution advantages, continued migration to Jet.com/walmart e-commerce
2) Immediate logistics/distribution expertise domestic and abroad (AMZ took one of the heads of sales from FDX a couple years ago to build out distribution for a reason)
3) Break into the millennial market opportunity (big assumption here is that they aren't doing a good job, but i don't have the data to support)

Netflix and FDX have to see the big picture here and see Amazon as a massive player in their spaces and taking food off their plate. If someone doesn't do something soon, Amazon will have too much scale and power for anyone to dethrone them. It's pretty incredible to watch how much havoc they've already created in literally every industry they touch.

quote:

---

someone doesn't do something soon, Amazon will have too much scale and power for anyone to dethrone them

---

Id argue were past the point now with momentum as is. Theyll be thr one store thats everywhere always online and offers everything easily shipped to your door. I dont consider walmart a competitor so much as the predecessor

quote:

---

That very well may be the case, but I don't think it's a foregone conclusion.

---

I just dont see how Wal-Mart competes long term. You have so many offerings, less overhead, less stock problems, and more customer data.

Walmart right bow is dominating but all that real estate and man power eventually will be their undoing.

Biggest things walmart has going is congrol over supply chain and logistics network in place. Amazon is great logistically but walmart is insanely dtrong here with privste fleet in place.