LAKELAND, FL and AUSTIN, TX
It’s almost too good to be true. Publix acquiring Whole Foods? Whole Foods’ shares on Thursday and Friday caused quite a stir when they surged in early trading, causing unsubstantiated rumors that Publix was considering a deal with the specialty grocer.
Publix says it doesn't comment on rumors and Whole Foods said the rumors had no merit. I'm still skeptical that a potential deal will happen, but Tampa Bay Business Journal says there are a few reasons why a deal would make sense.
1) Profit margins: Whole Foods may have seen record sales this quarter, but it missed analysts’ expectations on earnings, causing a severe 14% drop in its stock price in after-hours trading.
John Mackey, Co-Founder and Co-CEO, said, “We were overly optimistic…particularly in light of the rapidly changing competitive landscape.”
Since these rumors however, shares have been on the rise. Take a look at how the company's been doing over a one week period...
Comparatively, Publix has continued to post gains in revenue and earnings. Sales were up 4.1% to $7.8 billion, while earnings were up 4.8% to $493.7 million for the first quarter of 2014, according to Tampa Bay Business Journal. Could Publix help Whole Foods convert sales growth into profit growth? These rumors alone have caused Whole Foods’ shares to increase over the past couple of days.
2) Popularity: A recent Consumer Reports survey revealed that Publix was one of the top three supermarkets in terms of Service, Perishables, Prices, and Cleanliness. Similarly, Whole Foods scored high in every category besides prices; yet, in many cases, these higher prices are the result of items being organic, fair trade, or exotic. Combined, you could imagine a Whole Foods-Publix store being a big hit among consumers as well. Below is a link to our story on this Consumer Reports survey.
3) New and unexpected markets: We reported earlier that Whole Foods is beefing up its expansion goals by moving into new and unexpected markets with “smaller and urban” stores in places such as Brooklyn and Boise. Looking at these two maps from Big Think below, Whole Foods doesn’t have much of presence in the Southeast, while Publix doesn’t have the national footprint of Whole Foods. Could Florida be Whole Foods’ next big target for further expansion, or could Publix be looking to expand its store base nationally? Check out our story below on Whole Foods' expansion into these "new and unexpected" markets below.
Click here to read: Whole Foods Plans to Open in Unexpected New Markets
In case you missed it, here’s our previous article when we reported on the rumor:
Click here to read: Will Publix Acquire Whole Foods?
Of course, these reasons aren’t saying a deal is possible, but it’s definitely something interesting to think about. Why wouldn’t Publix want to eliminate one of its competitors and increase its market share? We’ll have an answer to this question soon. Stay tuned to DeliMarket TV for our next article when we discuss why a potential acquisition deal wouldn’t make sense.
Whole Foods
