Amazon (AMZN) stock moved 1.6% higher after the company announced plans to close its Amazon Fresh and Amazon Go stores to focus on delivery services and expanding Whole Foods, which Amazon acquired in 2017.
“While we’ve seen encouraging signals in our Amazon-branded physical grocery stores, we haven’t yet created a truly distinctive customer experience with the right economic model needed for large-scale expansion,” the company said in the release.
According to sources close to the matter, Amazon plans to evaluate each store to see which locations can be converted into Whole Foods stores. Amazon said it plans to open more than 100 new Whole Foods locations over the next few years, including through an expansion of its smaller footprint option, Whole Foods Market Daily Shop.
There are currently more than 550 Whole Foods stores in total.
“We have a very large grocery business,” CEO Andy Jassy told investors in the company’s earnings call in October. “If you look at our entire grocery business, if I don’t even count Whole Foods Market and Fresh, in the last 12 months [it grew] to over $100 billion of gross merchandising sales, which would make us a top three grocery in the US.”
Amazon is also making same-day delivery a top priority. Last year, the e-commerce giant expanded its same-day delivery service for perishable goods to over 5,000 US cities, with plans to expand in 2026.
“They are doubling down on something, on a trend … that’s saying that grocery buying is moving more online,” Hitha Herzog, H Squared Research chief research officer, told Yahoo Finance over the phone.
She added that consumer retention is increasingly hinging on customers’ ability to get orders delivered rapidly and with a level of quality control applied.
Jassy echoed this idea previously, saying that the tradition of the weekly grocery stock-up is changing. “We’re on to something very significant with what we’re doing with perishables from our same-day facilities,” he said.
One of the largest competitors in the space is Walmart, which has a grocery business that accounts for 60% of its US sales and has doubled down on convenience and same-day delivery with its Walmart+ membership model.
Amazon is set to report earnings after market close on Feb. 5.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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