First quarter sales at Amazon’s physical stores, which include Whole Foods, Amazon Fresh and Amazon One, jumped 6.6%, to $4.89 billion, from a year ago, but the company continues to find its footing in its effort to disrupt the grocery industry.
It was a particularly rosy quarterly earnings call for the company on Thursday, and not just for its brick-and-mortar stores—the company’s stock rallied, jumping 6%, on news that North American segment sales were up 11% year over year to $76.9 billion.
Amazon CEO Andy Jassy said the company’s grocery business continues to progress, noting that Amazon must build a “bigger physical presence since most shopping visits are still in physical stores.”
“That’s what we’ve been working on for a few years with the brand we’ve called Amazon Fresh,” Jassy explained. “We wish we were further along at this point. We’ve tried lots of ideas. We haven’t yet found conviction around a format that we want to go expand much more broadly.”
By the end of 2022, the Seattle-based retail giant operated 44 Amazon Fresh locations, 30 Amazon Go convenience stores and more than 500 Whole Foods Market grocery stores. Nearly half of the Amazon Fresh locations were opened in 2022 alone, but Amazon appears to have put opening plans on hold for at least half a dozen newly built Amazon Fresh stores.
News organizations across the U.S. have reported in recent weeks that Amazon Fresh signs at yet-to-be-opened locations have been removed without explanation. While Jassy did not address the future of those locations, he explained that Amazon is still working on developing the Amazon Fresh concept.
“We have a set of experiments and ideas and concepts that we’re working on across our dozens of stores there, and we’re pretty optimistic that we have something that may very well work, and we’re hopeful in this next year we find that,” he said. "But we continue to believe it’s a big business for us today and it’s continuing to get bigger, and we believe we have the opportunity for it to be much larger for Amazon and we can help customers more broadly.”
On the topic of Whole Foods, which Amazon purchased for $13.7 billion in 2017, Jassy said the chain “continues to grow nicely.”
The earnings call comes one week after it became public that Whole Foods will eliminate hundreds of corporate-level positions over the next couple of months. Whole Foods also is streamlining its sales regions to six from nine. An internal memo released to Winsight Grocery Business noted that the restructuring would “further simplify our operations, make processes easier and improve how we support our stores.”
“We’ve made a number of changes in the last year to the business that have changed the profitability trajectory there, and we feel good about that, and at the same time, it is still a portion of the overall market segment,” Jassy told analysts Thursday. “If you really want to serve as much of grocery as we’d like to, you have to have a mass physical offering.”