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Amazon expands Whole Foods delivery service

BY Deena M. Amato-McCoy

Amazon is expanding its grocery delivery service from Whole Foods Market to two new markets.

On Tuesday, the companies launched free, two-hour deliveries of natural and organic products from Whole Foods through Prime Now in Atlanta and San Francisco. The program initially launched last month in Austin, Cincinnati, Dallas and Virginia Beach, with plans for continued expansion across the U.S. throughout 2018.

Through the service, Prime members can order from “thousands of items” across fresh produce, bakery, dairy, meat and seafood, floral, among other everyday staples, all locally sourced items from Whole Foods Market. Select alcohol is also available for delivery to customers in San Francisco.

Prime members receive two-hour delivery for free, or they can pay $7.99 on orders of $35 or more, if they need groceries to arrive within an hour.

Customers can create an orders by visiting the Whole Foods Market selection on the Prime Now app available on Android and iOS devices, or on the Prime Now website.

The expansion coincides with Amazon’s ongoing efforts to integrate the two companies. Last month, the online giant announced that Prime members using their Amazon Prime Rewards Visa card at Whole Foods now earn 5% back on all purchases. This is in addition to the rewards they already receive, including 5% back on all Amazon.com purchases, 2% at restaurants, gas stations and drugstores, and 1% on all other purchases.

Non-Prime members that have the Visa card are entitled to 3% back. They also receive 3% back on all Amazon purchases, 2% at restaurants, gas stations and drugstores, and 1% on all other purchases.

Amazon acquired Whole Foods for $13.7 billion in September 2017.

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Target’s sales on the rise in Q4 results

BY Marianne Wilson

Wage increases took a bite out of Target’s profit in the fourth quarter even as its sales surpassed Street expectations and its digital channel continued to make impressive gains.

Net income for the quarter ended Feb. 3, which included an extra week, rose to $1.10 billion, or $2.02 a share, from $817 million, or $1.45 a share, in the year-ago period. Excluding non-recurring items, including about $388 million benefits from recent tax legislation, adjusted earnings per share came to $1.37, which was one penny short of analysts’ forecasts.

Target said investments in its employees increased the chain’s expenses and put a dent in profit margins. In October, the retailer raised its minimum wage to $11 an hour, with plans to increase it to $15 by the end of 2020.

Analyst Neil Saunders, managing director, GlobalData Retail, commented that Target’s excellent sales results “more than justify” its increased costs.

“We are encouraged that the 3.6% uplift in comparables was driven by an evenly split contribution from stores and online,” Saunders said. “Not only does this indicate that Target’s omnichannel strategy is delivering, but it also shows that the store enhancements are working. In essence, it justifies Target’s view that stores remain a critical part of the proposition and are worth spending money on.” For more, click here.

Sales rose 10.0% to a better-than-expected $22.8 billion from $20.7 billion last year, reflecting the impact of an additional week in this year’s fourth quarter. Same-store sales increased 3.6%, better than analysts had expected. Traffic rose more than 3%.

Comparable digital sales surged 29% and contributed 1.8 percentage points of comparable sales growth. Digital sales accounted for 8.2% of the company’s revenue mix in the fourth quarter, compared with 6.8% a year ago.

“Our fourth quarter results demonstrate the power of the significant investments we’ve made in our team and our business throughout 2017,” said Brian Cornell, chairman and CEO of Target Corporation. “Our team’s outstanding execution of Target’s strategic initiatives during the year delivered strong fourth quarter traffic growth in our stores and digital channels, which drove healthy comparable sales in every one of our five core merchandise categories.”

Target has been rolling out exclusive brands and limited-time partnerships, its newest being with British heritage brand Hunter. The company is also in the midst of a major update of its stores. On Monday, Target announced it will remodel 325 stores this year, on the heels of some 110 remodels in 2017.

In the first quarter of 2018, Target expects a low-single-digit increase in comparable sales and adjusted EPS of $1.25 to $1.45.

For full-year 2018, Target expects a low-single-digit increase in comparable sales and adjusted EPS of $5.15 to $5.45.

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Rite Aid asset transfer to WBA 85% complete

BY Michael Johnsen

Rite Aid on Monday reported the successful asset transfer of more than 85% of the stores the company is selling to Walgreens Boots Alliance. As of March 2, Rite Aid has transferred 1,651 stores and related assets to WBA, and has received cash proceeds of $3.6 billion, which the company continues to use to reduce debt.

Under the Asset Purchase Agreement, WBA will purchase a total of 1,932 stores, three distribution centers and related inventory from Rite Aid for an all-cash purchase price of $4.4 billion on a cash-free, debt-free basis.

The majority of the closing conditions have been satisfied, and the subsequent transfers of Rite Aid stores and related assets remain subject to minimal customary closing conditions applicable only to the stores being transferred at such subsequent closing, as specified in the Asset Purchase Agreement.

Rite Aid expects to complete the store transfer process in the spring of 2018.

After all stores are acquired, stores are planned to be converted to the Walgreens brand in phases over time. The stores to be purchased are located primarily in the Northeast and Southern U.S., and the three distribution centers to be purchased are located in Dayville, Conn., Philadelphia, Pa., and Spartanburg, S.C.

The deal was first announced in September.

More recently, Albertsons announced its intent to merge with remaining Rite Aid stores as part of a deal that would make the new Albertsons/Rite Aid combo the fourth largest pharmacy in the U.S.

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