Whole Foods Faces Store Closings As Biggest Retailers In America Brace For Bankruptcies
By Investment Watch Blog
Now several Whole Foods stores are being shuttered as fears of retail bankruptcies grow across the sector. Experts are saying that the organic supermarket chain is Amazon’s biggest risk and many pieces of evidence show why Whole Food locations are falling apart faster than other grocery stores.
This week, Whole Foods made the headlines after it announced the shutdown of a flagship store in San Francisco. The company is closing its doors only one year after opening there, citing horrible street conditions outside as the reason. The decision caused a stir online, with people taking to Twitter and Reddit to express their frustration. “I’m incredibly disappointed but sadly unsurprised by the closure of Mid-Market’s Whole Foods,” San Francisco Board of Supervisors member Matt Dorsey tweeted on April 10. The San Francisco store wasn’t the only one on the food retailer’s chopping block. Recently, it has announced store closings in four states: Alabama, California, Illinois, and Massachusetts.
The volatility faced by the company makes many retail experts argue that Whole Foods is Amazon’s biggest risk. According to analysts with the Wall Street Journal, Amazon’s new CEO Andy Jassy has a daunting challenge on his hands as the upscale grocery chain continues to fall short of earnings expectations amid rising inflation.
That concern is raising many alarm bells particularly because the e-commerce retailer just announced the shutdown of many of its Amazon Fresh, Amazon Go, and Amazon Style stores, as well as its Just Walk Out cashier-less locations a few months ago, and the permanent closure of all of its physical bookstores, Pop Up stores and 4-star stores.
In 2022, Amazon reported a loss of $3.84 billion, or $7.56 per share, compared to a profit of $8.1 billion, or $15.79 a share, during the same period in 2021. In other words, it looks like Whole Foods is Amazon’s $13.8 billion liability, and six straight quarters of declining sales are proof that consumers are losing interest in the stores as prices become too out of their reach.
Data shows that rival chains including Sprouts Farmers Market, Kroger, and discount chain Aldi are between 19% and 24% cheaper than Whole Foods. They have also picked up a considerable share of Whole Foods customers. Last month, Barclays advised that Whole Foods had experienced a “staggering” decline in foot traffic that it estimated at 3% or roughly 14 million customers.
No wonder why Amazon is rushing to reduce its retail footprint and cut costs to save its business. According to a Deloitte survey, the 2023 retail outlook for bankruptcies is worse than pre-pandemic levels. Over half of retail business owners, or 55.3 percent, who were surveyed projected a higher risk of downsizing, debt default, or bankruptcy in 2023, as sentiment across the sector continues to deteriorate.
“Many retailers’ financial models don’t make sense anymore, their debt loads don’t make sense anymore, and they aren’t functional companies anymore,” says Craig Ganz, a bankruptcy lawyer with Ballard Spahr. “A whole slew of these retail companies just can’t survive,” the expert warns.
At the end of the day, the latest wave of stress will continue to separate winners from losers. “We’re going to see what I refer to as the continuing Darwinism effect on retail,” says Perry Mandarino, head of restructuring at B. Riley Financial Inc. “Only the strongest survive.”And we will soon find out if Amazon’s biggest grocery chain is strong enough to stay alive.
