On the trail to world domination Amazon is now to take over Whole Foods in a whopping $13.6 billion dollar deal. For many years Amazon has been experimenting in groceries, without much success, this deal seems to suggest that the ecommerce giant has conceded that grocery shopping needs to have a mix and match of traditional local outlets and online ordering combined.
The Amazon share price reacted positively to the news, gaining a modest 3%. However, the best is still to come. The company will without doubt use this acquisition to get the model correct, and then begin to roll it out into new territories such as the UK.
In the UK leading grocery stocks fell with investors beginning to worry on the competition a giant such as Amazon would bring to their (until now) market. However, Morrisons share price gained, as they already have a deal in place to supply groceries for Amazon Fresh, a small test project in London. This leads many to think if they do decide to pursue this in the UK then that will be their takeover target.
Another advantage that Amazon have, compared to the main players in the UK, is that shareholders of Amazon do not expect dividend growth. They are perfectly happy to see revenue poured back into development, and as long as the share price appreciates everyone is happy.
In the UK most supermarkets share holders are dependent on dividends to see good long term returns from holding their shares. Prices have not shown steady growth in what is now a unstable sector, due to cut price stores like Aldi and Lidl take more and more market share. With such a large firm such as Amazon on their way to the UK, it would not be surprising to see some major moves from the UK firms to position themselves correctly for when the shake up of their industry happens.
Posted first at: http://www.stockpricetoday.com/stock-news/amazon-shows-its-hand/