One Year After Amazon Bought Whole Foods, Who's Winning The Grocery War?
Zacks Investment Research | Jun 15, 2018 10:00PM ET
Amazon (NASDAQ:AMZN) might have forever changed the grocery industry exactly one year ago when the e-commerce giant bought Whole Foods for roughly $14 billion on June 16, 2017. Today, grocery delivery is commonplace across the entire industry.
Overview
Nielsen (NYSE:NLSN) and the Food Marketing Institute released their second-ever "Digitally Engaged Food Shopper" study earlier this year, which stated that within the next five to seven years 70% of consumers will do at least some grocery shopping online. Furthermore, FMI and Nielsen estimated that people will spend $100 billion year in this budding industry.
Amazon’s e-commerce dominance sparked this growth and forced Walmart (NYSE:WMT) , Target (NYSE:TGT) , and many other grocery players to dive headfirst into e-commerce, delivery, and curbside pick-up.
Before we jump into what the individual companies are doing on these vital fronts, let’s take a quick look at their price performances since Amazon bought Whole Foods last year.
Investors will note that Target stock has outperformed some of its peers over the last year, by a pretty wide margin. With that said, Amazon stock has soared nearly 78%, but it operates a much bigger and more diversified business than these grocery and big-box retailers.
Walmart
In March, Walmart announced its plan to expand its online grocery delivery option to more than100 metro areas by the end of the year. At the time, the service was only available in six markets.
The big-box giant also offers an order online, curbside pickup up service called “Grocery Hero” at 1,000 stores, with the company expected to add that service at 1,000 more locations by end of 2017. Investors should note that Walmart’s first-quarter e-commerce sales surged by 33% in the U.S.
Target
Target also introduced its online ordering, curbside pickup service called “Drive-Up” at more than 250 stores last quarter. The company also expanded its “Restock” program nationwide, allowing customers throughout the U.S. to shop from thousands of popular items for next day delivery.
The Minneapolis-based retailer saw its digital sales surge 28% in Q1, on top of a 21% climb in the year-ago period. Target also introduced same-day delivery at over 700 locations, which was made possible by its $550 million December 2017 purchase of grocery delivery startup Shipt.
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Costco
Big-box powerhouse Costco (NASDAQ:COST) launched CostcoGrocery last fall. The service offers two-day delivery for non-perishable food and household supplies to Costco customers nationwide. Meanwhile, the company expanded its same-day delivery service to “most metropolitan” areas through an updated partnership with grocery delivery startup giant Instacart.
The company’s most recent quarterly financial results helped demonstrate how well Costco’s online ordering and delivery business has performed. The wholesale retailer’s quarterly revenues popped by 12% to $32.36 billion, with e-commerce comp sales up 36.8%.
Kroger
Grocery chain Kroger (NYSE:KR) recently started its “Restock Kroger” initiative, aimed to accelerate its digital and e-commerce offerings. The company currently offers online ordering and curbside pickup through its ClickList service.
Like Costco and many others, including CVS (NYSE:CVS) , Aldi, and Jewel-Osco, Kroger works with Instacart for same-day delivery. It’s unclear exactly how effective Kroger’s new e-commerce and delivery initiatives have been, but its upcoming first quarter might give investors a better idea. The company is expected to report its Q1 financial results before the market opens on Thursday, June 21 (also read: Upcoming Earnings to Watch: FDX, KR, DRI ).
Bottom Line
Amazon changed the retail grocery business forever before it even bought Whole Foods. Today, consumers have online delivery and curbside pickup options at nearly every major U.S. chain, with most of the company’s rapidly expanding their same-day delivery offerings on their own or through partnerships.
Going forward, don’t be surprised if a company like Costco, which is projected to pull in nearly $140 billion this year, buys grocery delivery superstar Instacart before the company decides to go public.
There is no clear winner at the moment, aside from customers around the U.S. who have exponentially more online and grocery delivery options than they did one year ago.
Wall Street’s Next AmazonZacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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