The Grim Reaper of retail is at it again. This morning Amazon.com Inc. (NASDAQ:AMZN) announced its intent to acquire Whole Foods Market, Inc. (NASDAQ:WFM) for $13.7 billion, driving the stock about 27.6% higher as of 12:36 p.m. EDT during Friday's trading session.
Although Amazon's new competitors in the grocery space were hit much harder, America's largest retail pharmacy chains are feeling some pressure today. Also as of 12:36 p.m. EDT on Friday, shares of CVS Health Corp. (NYSE:CVS) and Walgreens Boots Alliance Inc. (NASDAQ:WBA) had slumped 4.4% and 4.9%, respectively.
Amazon's $13.7 billion offer for Whole Foods works out to about $42 per share for the purveyor of all things organic. Since there's very little for antitrust regulators to complain about, the cross-industry tie-up is widely expected to complete without a hitch, driving Whole Foods shares right up to the offered price.
At CVS Health, and Walgreens Boots Alliance, retail operations have been disappointing lately. In the first quarter, CVS reported a 4.7% decrease in same-store sales. During the three months ended February, Walgreens reported comparable retail sales 0.8% lower than the previous-year period. Amazon's push into grocery might not relate directly to the pharmacy chains, but any move by the e-commerce giant is likely to have a knock-on effect while their sales are flat to negative.
Amazon expects to complete its acquisition of Whole Foods in the second half of 2017. The supermarket chain will be obligated to pay a $400 million breakup fee if it decides to back away, which suggests the deal will get done without any roadblocks.
In the retail pharmacy space, Walgreens Boots is far more exposed to a potential threat from Amazon. Based on fiscal second-quarter results, the company's U.S. retail pharmacy segment was responsible for about 78% of total gross profit during the period.
CVS Health, on the other hand, has used its retail footprint as a springboard to expand into long-term care facilities, pharmacy benefits management, and walk-in clinics, just to name a few of its related sales channels.
Although CVS Health might have less to worry about from a retail standpoint, the e-commerce giant fired a shot across its bow last month. Amazon recently hired Mark Lyons from Premera Blue Cross to build an internal pharmacy benefits manager for its own employees -- and the company has been known to test the waters with its own staff before launching new services for the public.