Attention United Natural Foods Investors: The Amazon-Whole Foods Deal Could've Been Worse
United Natural Foods, Inc. (NASDAQ:UNFI) investors should not be overly concerned about Amazon.com, Inc. (NASDAQ:AMZN)'s recent acquisition of Whole Foods Market, Inc. (NASDAQ:WFM), according to Loop Capital Markets managing director, Andrew Wolf.
Wolf maintains his Buy rating on United Natural Foods, but he trimmed his price target from $48 to $44.
United Natural Foods, currently has a supply contract in place with Whole Foods through 2025. After Wolf spoke with management at United Natural Foods, he believes this is still the plan. “It would take Amazon many years to replicate United Natural Foods direct-store-delivery network if it chose to do so,” he said.
This Is Not A ‘Non-Event’
On Monday, Pivotal Research's Ajay Jain said the acquisition will have a “mostly neutral” impact on United Natural Foods. However, he noted it was certainly not a “non-event,” and highlighted how Amazon is very capable of demanding pricing concessions as management might want to control more of Whole Foods' supply chain.
Wolf also pointed out Whole Foods does not have the store density or buying power to allow them to self-distribute. Currently, United Natural Foods offers Whole Foods the lowest cost to acquire organic and natural foods.
Overall, while Amazon’s acquisition of Whole Foods might have a huge impact for a variety of businesses, United Natural Foods investors should be concerned.
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