Think about being a tech company with the scope of earnings that you could buy a grocery store and cut prices all while increasing your margin.
Certainly, that’s Amazon.
In saying the upcoming close of its $13. 7 billion dollars purchase of Whole Food on Thursday, Amazon also said that starting next week, it will offer affordable prices on popular items, including “Whole Investment organic and natural bananas, responsibly-farmed trout, organic and natural large brown ovum, animal-welfare-rated 85% lean surface beef, plus more. ”
Below is why that’s possible.
The other tech giants — Apple, Alphabet, Microsoft and Facebook — have working margins for the latest quarter including 23 percent to 47 percent. Which the percentage of income left after subtracting all the costs of goods sold as well as expenses for research and development, sales and marketing and administration.
Amazon’s working margin for the second quarter was obviously a paltry 1. 7 percent. Whole Foods recorded working profit of 4. almost eight percent.
For Jeff Bezos, that gap amounts to try out money. Investors have persisted to guess on Amazon online, bidding the stock up 26 percent in the past year, despite Bezos’ willingness to run with retail-like margins. With those varieties of returns, investors certainly aren’t going to be asking for a buyback or dividend.
What ever profit the company produces from its highly rewarding Amazon Web Services section gets constantly invested back again into other projects, whether that’s developing robots, drones and consumer devices, building fulfillment centers or buying movies and TV shows because of its streaming service.
Whole Foods will get similar treatment.
As analysts from research advisory firm Gordon Haskett wrote in a June report following the recommended deal, Bezos are certain to get “a plethora of new teammates to help the company keep costs down, localize assortments and improve both in-store price/perceptions. inches
It’s good news for Quinoa lovers. And bad news or information for rival supermarkets that, so far, could at a minimum of label their upscale compete with as “whole paycheck”