Whole Foods Announces Solid Q3 Earnings, Analysts Speculate Amazon Could Grow to $1 Trillion

Whole Foods Market announced financial results for its third fiscal quarter ending July 2, 2017, reporting solid sales and strong returns for shareholders in the wake of its announced acquisition by Amazon. Meanwhile, some analysts have suggested that, after the merger is finalized, Amazon could become the first trillion-dollar company, in part as a result of the proposed merger.

“For the quarter, we delivered record sales and free cash flow, and returned $44 million in dividends to our shareholders,” said Whole Foods Co-Founder and CEO John Mackey. “Our comparable store sales improved sequentially on a one- and two-year basis in the third quarter, and that momentum has accelerated 220 basis points in the fourth quarter, resulting in positive overall comps for the first three weeks.”

The report’s highlights included:

• Total sales increased 0.6% to a record $3.7 billion, while comparable store sales decreased 1.9%
• Net income was $106 million or 2.8% of sales, with diluted earnings per share of $0.33
• EBITDA was $293 million, or 7.9% of sales

The company also noted, in its press release, operating cash flow of $277 million, free cash flow of $145 million, and the company returned $44 million in dividends to shareholders, ending the quarter with $1.5 billion of total available capital compared to $1.0 billion in total debt.

While same store sales declined, Bloomberg reported that declines were less severe than anticipated, prompting the news source to speculate that the previously embattled retailer is likely on the rebound.

Whole Foods noted that because of the definitive merger agreement with Amazon—in which the tech-giant will acquire the grocer for $13.7 billion cash at $42 per share—the company will not be adjusting their outlook for fiscal 2017.

Meanwhile, analysts from CNBC have speculated that the completed merger between Amazon and Whole Foods could result in the former company’s stock doubling in value. Equity analyst James Cakmak, of Monness, Crespi, Hardt, & Co., told the news source that the company could reach record value in a short time.

"Honestly, this could be the first trillion-dollar company,” Cakmak speculated on the financial news program “Squawk Box.” He added, “I mean there is very low risk for the FTC to not approve this deal. But if they do rubber-stamp it as a yes, I think there's very little to stop this from becoming a $2,000 stock."

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