Amazon's secret plans for new grocery stores

Gina Acosta
Executive Editor
Gina Acosta profile picture

Amazon is working with Whole Foods executives on a new format poised to disrupt the grocery industry.

During the company's third-quarter conference call, Amazon CFO Brian Olsavon told analysts and investors that the retailer is working on developing new grocery store formats as part of its integration of Whole Foods Market.

"There will be a lot of work together between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site, Amazon Lockers at the Whole Foods stores. So, there will be a lot of integration, a lot of touch points and a lot of working together as we go forward. And we'll be also developing new store formats. We are experimenting with a lot of formats. I think that Whole Foods really gives us a vast head-start on that and a great base,"  Olsavsky said. "So we're really excited about that and I think working together, will bring our different strengths to the table and really be able to build on behalf of customers."

Interestingly, Olsavsky also said that the company is also going to open more Whole Foods stores.

"We are adding a few more in the near future in California, Washington, D.C., and Austin. So, yeah, you will see more expansion from us. We're not ready to announce what that will look like and we are working with the Whole Foods team on how many more stores we might have in that area. But still early, so those plans will develop over time," Olsavsky added.

On Friday Whole Foods announced it would be hiring 6,000 new workers for its U.S. stores. The company will be hosting an event on Nov. 2 that includes full-time and part-time opportunities for both seasonal and permanent positions, including cashiers, culinary experts and prepared foods specialists. Candidates can visit any Whole Foods Market store on that day and receive an interview, with opportunities for on-the-spot job offers.

Amazon's third quarter report marks the company's 10th straight profitable quarter and its biggest sales to date. Net sales increased 34% to $43.7 billion in the third quarter, compared with $32.7 billion in third quarter 2016. Net sales includes $1.3 billion from Whole Foods Market, which Amazon acquired on Aug. 28. Excluding Whole Foods Market and the $124 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 29% compared with third quarter 2016.

Operating income decreased 40% to $347 million in the third quarter, compared with operating income of $575 million in third quarter 2016. Operating income includes income of $21 million from Whole Foods Market.

Net income was $256 million in the third quarter, or $0.52 per diluted share, compared with net income of $252 million, or $0.52 per diluted share, in third quarter 2016.

“In the last month alone, we’ve launched five new Alexa-enabled devices, introduced Alexa in India, announced integration with BMW, surpassed 25,000 skills, integrated Alexa with Sonos speakers, taught Alexa to distinguish between two voices, and more. Because Alexa’s brain is in the AWS cloud, her new abilities are available to all Echo customers, not just those who buy a new device,” said Jeff Bezos, Amazon founder and CEO. “And it’s working — customers have purchased tens of millions of Alexa-enabled devices, given Echo devices over 100,000 5-star reviews, and active customers are up more than 5x since the same time last year. With thousands of developers and hardware makers building new Alexa skills and devices, the Alexa experience will continue to get even better.”

For the fourth quarter, Amazon predicts net sales of $56 billion to $60.5 billion. That would be growth of 28% to 38% compared with the fourth quarter of 2016. That forecast includes the impact from its acquisition of Whole Foods, and it also includes a favorable foreign-exchange rate. Operating income is expected to be anywhere from $300 million to $1.65 billion, compared with $1.3 billion in the fourth quarter of 2016.