There's a chance Walmart will go head-to-head with Amazon to buy Whole Foods

Amazon's deal to acquire Whole Foods merger may seem like a dream come true to some, but there's a realistic chance Walmart could still swoop in to trump Amazon's $13.7 billion offer, according to JPMorgan.

Whole Foods stock has been trading above Amazon's offer of $42 a share, signaling that investors believe a bidding war could emerge and drive up the final price for Whole Foods.

Competitors like Target, Costco, and Kroger have been rumored as potential suitors, and they'd do anything to make this deal harder for Amazon, according to Barclays analyst Karen Short.

29 PHOTOS
Prices at Whole Foods vs. Trader Joe's
See Gallery
Prices at Whole Foods vs. Trader Joe's

Red peppers

Trader Joe's: $0.99 each 

Whole Foods: $3.99 per pound

One medium-sized red bell pepper weighed nearly one pound, so peppers were far more expensive at Whole Foods. 

Organic avocados

Trader Joe's: $2.29 each 

Whole Foods: $2.79 each 

Organic strawberries

Trader Joe's: $5.99 for 16 ounces

Whole Foods: $5.99 for 16 ounces

Strawberries were expensive across the board.

Green seedless grapes

Trader Joe's: $3.99 for 20 ounces, or $3.19 for one pound

Whole Foods: $2.99 for one pound (on sale from $3.99 per pound)

Organic bananas

Trader Joe's: $0.29 each

Whole Foods: $0.99 per pound

Three medium-sized bananas weighed around a pound, so this was a close call.

Multigrain bread

Trader Joe's: $2.99 for 24 ounces

Whole Foods: $3.49 for 24 ounces

Buying two loaves of bread at Whole Foods would have brought the cost down to a comparable $3 per loaf. 

White bread

Trader Joe's: $2.69 for 24 ounces

Whole Foods: $3.49 for 24 ounces

There was a big difference, though the white bread at Whole Foods was organic.

Ground beef

Trader Joe's: $4.99 per pound

Whole Foods: $9.99 per pound

Again, the cheapest option at Whole Foods was organic. 

Ground turkey

Trader Joe's: $3.99 per pound

Whole Foods: $7.99 per pound

Uncured sliced bacon

Trader Joe's: $5.49 for 12 ounces

Whole Foods: $4.99 for 12 ounces

Whole Foods is the winner here and there was a good selection on sale. 

Organic white potatoes

Trader Joe's: $1.oo per pound

Whole Foods: $1.20 per pound

Organic white tortilla chips

Trader Joe's: $2.69 for 16 ounces

Whole Foods: $2.99 for 16 ounces

Vanilla ice cream

Trader Joe's: $3.99 for 32 fluid ounces

Whole Foods: $4.99 for 32 fluid ounces (organic)

Trader Joe's ice cream was cheaper but the 365 version at Whole Foods was organic. 

Parmesan 

Trader Joe's: $5.38 for one pound

Whole Foods: $12.77 for one pound

Organic mayonnaise

Trader Joe's: $3.69 for 16 ounces

Whole Foods: $3.69 for 16 ounces

A dead heat!

Extra virgin olive oil

Trader Joe's: $6.99 for 33.8 fluid ounces

Whole Foods: $9.99 for 33.8 fluid ounces

Organic marinara sauce

Trader Joe's: $2.49 for 25 ounces

Whole Foods: $2.99 for 25 ounces

Organic spaghetti

Trader Joe's: $1.29 for 16 ounces

Whole Foods: $1.49 for 16 ounces

Chili flakes

Trader Joe's: $1.99 for 1.3 ounces

Whole Foods: $3.99 for 0.99 ounces

Dried basil

Trader Joe's: $1.99 for 0.3 ounces

Whole Foods: $2.99 for 0.53 ounces

Organic crunchy peanut butter

Trader Joe's: $3.49 for 16 ounces

Whole Foods: $3.99 for 16 ounces

Organic milk

Trader Joe's: $3.49 for a half gallon

Whole Foods: $2.39 for a half gallon

The milk at Trader Joe's is organic.

Organic plain yogurt

Trader Joe's: $3.99 for 32 ounces

Whole Foods: $3.39 for 32 ounces

Whoa! A great deal on organic plain yogurt at Whole Foods. 

Frozen peas

Trader Joe's: $1.29 for 16 ounces

Whole Foods: $1.39 for 16 ounces

Almond Breeze almond milk

Trader Joe's: $1.99 for 32.8 ounces

Whole Foods: $2.19 for 32.8 ounces

Both stores stock Almond Breeze almond milk, we did a direct comparison of the product: Trader Joe's was $0.20 cheaper.

Hummus

Trader Joe's: $1.99 for 8 ounces

Whole Foods: $2.19 for 8 ounces

Eggs

Trader Joe's: $2.69 for a dozen cage-free large eggs

Whole Foods: $4.39 for a dozen organic large eggs

Note that Whole Foods' eggs are organic and Trader Joe's are cage free. 

Rolled oats

Trader Joe's: $3.99 for 32 ounces, or $2.00 per pound

Whole Foods: $3.19 for 18 ounces, or $2.84 per pound

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

According to JPMorgan, Walmart is the only retailer with a legitimate shot of entering the fray.

Here's JPMorgan (emphasis added):

"From our perspective, we have a hard time seeing Kroger, Costco, or Target coming in over the top. We do think there is a chance that Walmart makes a bid. There are compelling reasons for it to do so (adding new, generally wealthier customers; acquiring a strong brand; generating synergies and efficiencies; et al), in addition to keeping Amazon out of its wheelhouse."

Walmart is the only company with the financial might to play ball with Amazon. The current offer for Whole Foods comprises only 3% of Amazon's market cap and only 6% of Walmart's. It would match 64% of Kroger's.

Here's how other companies would fare, including Costco (COST), Publix (PUSH), Target (TGT), and Netherlands-based Ahold-Delhaize (AD NA).

JPMorgan note whole foods walmartJPMorgan

Walmart also has plenty of incentives to make a move for Whole Foods, according to JPMorgan. Among them:

  • Grocery is its strongest advantage right now against Amazon, its top competitor. That moat is significantly diminished once Whole Foods is safely in Amazon's clutches.
  • Walmart could leverage the distribution network of its roughly 4,000 locations to help expand Whole Foods' audience.
  • Whole Foods would also fit nicely into Walmart's network of stores without overlapping too much, as their stores are concentrated in urban, high-income locations.

That's not to say that a Walmart bid would be a slam dunk. While JPMorgan thinks Walmart is the only competitor in the group "with the means and motive to counterbid," doing so would have serious downsides.

For starters, it puts Walmart in a defensive position rather than offensive: It already owns a colossal network of brick and mortar grocery stores; what it really needs to improve is its online platform.

Here's JPMorgan:

"Given Walmart's 20%+ share in grocery, why should the company spend $14B+ on what it's already good at (selling food via brick-and-mortar) when the money instead could be used to expand and improve Jet.com and Walmart.com? Jet.com is Walmart's urban/millennial alternative to Amazon Prime, and Walmart.com is in many ways the 'forgotten man's' alternative to Prime."

It would also be very difficult to overcome the culture clash. For instance, Whole Foods CEO John Mackey has focused intently on employee welfare — even to the detriment of shareholders, he acknowledges — while Walmart is notoriously stingy on benefits and has reputation for paying minimum wage, JPMorgan notes.

When Walmart spent $310 million last Friday to acquire Bonobos — a high-end brand like Whole Foods — fans of the hip fashion brand were furious, saying it was "no longer cool." It's hard to imagine Whole Foods loyalists would be more subdued.

"As cultural similarity is often a key determinant of a successful merger, we think WMT and WFM have conclusively different guiding principles for the two entities to combine and thrive," JPMorgan wrote in the note.

Walmart is probably the only company out there with the financial firepower and the motive to compete with Amazon for Whole Foods. But it wouldn't be easy, and Amazon, with a cash war chest nearly $20 billion larger than Walmart's, will have the right to match or beat any offer that comes in.

NOW WATCH: JIM ROGERS: The worst crash in our lifetime is coming

See Also:

Read Full Story

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.