whole foods halted for news pending. >> could be some kale related issue or something, right? >> there was an article this morning talking about one of the fund -- the founder going after one of the funds - >> there's a whole activist situation that's going on. >> not about - >> we're out of time happy father's day to both of you and to my dad and my husband. bye, everybody see you back here on monday. ♪ good friday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer at the new york stock exchange david faber is off we were looking at some recuperation in equities the dollar, the curve, but then housing starts missed big down 5.5. brought futures basically back to the flat line europe is positive oil on the longest losing streak in about two years road map begins with shares of

nike on a downgrade from jpmorgan after those layoffs yesterday. apple getting serious on content hiring two big time executives from sony. we'll go live to miami ahead of the president's expected announcement on cuba this afternoon. we are getting some breaking news on whole foods. >> holy cow. >> i heard you gasp just now. >> this is such a game changer amazon to buy whole foods. you know yesterday was a day for kroger that was tough today will be an even tougher day. this is a game changer this is it this is what everybody thought could happen they will now dominate food within the next two years. wow. >> just yesterday we were reading a piece in texas monthly, john mackey, basically going after activists saying they're not interested in the long term. more interested in the short term stock was halted i would say about four or five minutes ago for news pending

but this -- this is -- >> wow. >> a day we'll remember for a long time. >> yes, we will. i guess mackie had enough of them he's one tough -- he's a tough guy, all right now, let me just say this is a reordering because what amazon can do is use this as a -- now, there's not that many stores hay can do 1,200 stores. they have a third of that, but what this says is that amazon wants to do for food which they have struggled with what they did for every other part of retail it is get out of dodge time. two german companies have moved in aggressively, walmart, target everybody who sells food everybody. because you can't compete. amazon they will not let you compete. this is incredible i mean, this was rumored and i mean, i thought it would be brilliant in some ways if amazon wanted to dominate food which i didn't think they wanted to. but now they can because the big

issue with food had always been that you can't -- it doesn't travel it doesn't need to travel. this is their launching pad. they have all the money in the world. they can build all the stores then in the world, they can change the whole business, paradigm, which has been crowded by the fact that the dollar stores have it and aldi, lytle, the two german companies that moved in, trader joe's. what does kroger do, that conference call from kroger yesterday, it was depressing it was like night mother tough show to watch. i think that this made it so it's night mother 2. >> even after the bloodletting yesterday, it's down 6% now. walmart's down 2%. amazon down 1.5%. >> well, you know, amazon, see what kind of money they're playing with but they have a -- whole foods was down a couple of bucks off of kroger. congratulations to them.

i struggle to figure out what the whole industry is going to look like. is everyone a department store waiting to be eaten alive? bezos has incredible scale i want to watch costco because they're the company that's able to have food for low prices because they make it up with the -- >> with the membership, sure. >> what kind of day, this is supposed to be a summer day, going to the beach i'm canceling the beach. that's it. the hamptons, forget them. this is the hamptons -- forget amagansett, this is it. >> has there been a more ambitious purchase by amazon >> no. john mackey, i guess he just was exhausted by these people. and he did have cannibalization. and yes, there were problems no doubt about it, whole foods became a high cost operator. different regions, there were ways to slim it down i think he got fed up.

he got fed up because you know what he was -- he is a visionary. he is. but you know, you can only take so much. these activists have made life miserable for a lot of people. and this was a savior for him. i think their model was going to be challenged. the two german entrants would come in. what target is doing, trying to figure out where it is walmart was making a big move into food. they'll still make a move. this is food deflation the fed has to think about this. >> yeah. >> we should no longer just asterisk food to inflation amazon is a deflationary force gary cohn recognizes it. he's talked about this but this is food deflation we are going to pay so much less for food i pay $5 for a gallon of milk, that's over. >> wow for a company whose reputation

was for expensive food, right? the deal is being valued here at 13.7 you saw from the lower side of your screen -- >> geez. whole foods. >> here's a quote from bezos, millions love whole foods market because they offer organic foods and whole foods market has been satisfying, delighting and nourishing customers for nearly four decades they're doing an amazing job and we want that to continue. >> now they'll get a sales -- get something -- i mean here's what you get you immediately get -- use your phone. or you -- you know, you order on amazon the whole foods guys will deliver it to you. they'll have a delivery system maybe they use an uber system, maybe they use -- i don't know they can use grubhub whatever they have -- they will get it to you. they will get it to you. this is it it will be very hard to compete against these guys and i just -- i look at this and i think if i look -- if i work

at kroger right now, i'm thinking how -- what do i do, what do i do i have a high cost versus them amazon can strip down the cost remember, amazon is able to do self- -- they have self-checkout. you'll go boom boom boom i'm stunned. >> now, that said, whole foods has about 430 stores. >> but they did have a road map to do 1,200. >> kroger's, 3,000. >> stores that are going to be hurting because you cannot compete with amazon. you just can't i don't know what going to happen here. i just think this industry -- i called the industry last night on "mad money" completely uninvestable now it's totally uninvestable. i don't think anyone knows -- no one knows how to compete with them no one maybe walmart. so walmart will be a -- we'll be getting eggs, they'll be giving us eggs. we may be finding that this is

the ultimate buy one/get one we are going to experience tremendous -- a great thing for america. our inflation, it's going to be very hard to have food inflation. very hard. >> it feeds into the ongoing narrative, jim, of disrupters subsidizing music, entertainment, cellular service. food now and we'll see if that migrates to other forms of retail. >> you know what i happen to have been a huge walter robb fan. i like john, i met him several times at the brooklyn store. i love my brooklyn store walter robb this may be a dream come true in some ways because what happened is that robb likes to feed the world. i mean, he's always about doing the right thing. and doing -- you know, right by consumers. and now carl the key thing, amazon is nonunion now yesterday on that call, there was a moment on that kroger call which was, you know, remember, that was the -- it was the opposite of dickens. it was the worst of times, it

was the worst of times it was the season of winter, it was the season of winter what happens is this kroger had higher labor costs and food deflation it is almost -- do you know that kroger is a great company. they're the best my fred meyer in oregon, i can eat off the floor. not that i want to eat off the floor, but forget it i don't want to eat off the floor, but i do -- look, walmart buys -- why don't you buy netta puerta. >> walmart - >> they have answered it i have some -- i have some of their shirts they look great. >> they're nice. >> it's a -- once they sent me home because my shirt was pilling. this is a deal that you have a no union versus union environment. you have guys who play with wampum, jeff bezos, you have assembly lines and food.

i have to tell you, this is going to make it so you scan, no lines. i hate the lines at i many whole foods, i -- at my whole foods, i'll walk right out. >> you're out. >> yeah. >> by the way, whole foods is going to keep its stores under that brand mackie is going to remain ceo. >> terrific. >> headquarters will remain in austin. >> oh, i want them -- let's bring back walter robb come on, bring back walter robb because we want a heart. what's the matter with a human face capitalism with a human face is walter robb. i miss him look at walmart, kroger. this is supposed to be a friday where i was -- the wife was saying, can you take the early train, the early train, with the gin and tonic, no. >> that was a big move. >> we're doing a show tomorrow. >> big move for a big market cap name like walmart. 3% move too often --

>> why is there no acquisition halo for some of those other names? investors not counting on -- >> i saw sprouts market had it for 30 seconds the one i struggle with is target i mean, target has been struggling with food mightily. they're trying to figure out -- there's a race to the bottom if you were on that kroger call which i have now equated to almost every sad thing bang the drum kroger it is one of the situations that kroger is stuck saying, listen, we'll compete on price, basically. that was underneath the cap -- we call it the chyron or the lower deck i don't know what they call it. >> lower third. >> lower third, yes. we will -- every day low price this is not every day low price. this is every day we have to give food away even faber will want to go to the supermarket with me. i mean, like hey, listen, i like the eggs for free, how about we throw in some milk amazon, you know what, imagine

if you say i like -- i like kensington mustard you might like hellmann's mayonnaise two unilever products to give paul polman a kiss there. >> amazon has gone down 30 and change to 21 and change in two days >> kroger is without a doubt the most consistent player you know, they have fabulous research they do great things they even understood that packaging that millennials hate packaging. you go in, they have the big stacks of things and you open the thing and you spill the cheerios, you have the ugly fruit area, because you don't want to throw it out it doesn't matter, carl. it doesn't matter. amazon is here an industry is done. >> you mean industry at large is - >> the food --the grocery business everybody could be like the great atlantic and pacific tea company when they're done. tnp is their model

take no prisoners. >> then there's the added layer of what this does for other amazon logistics -- i mean, it gives them a huge parcel of real estate around the country. >> now we know this is like digital realty. now we know they have a base and remember, when walter robb was there, walter robb, they did 1200 -- they got sidetracked the ceos, push me pull me thing. this is without a doubt if you were shaking right -- brian cornell is saying -- he's like calling an emergency meeting like defcon 4. like, wow, it's like jack bauer. >> i have -- >> jack bauer. they need chloe. >> so what was the whole notion that amazon was going to experiment with brick and mortar. >> they're not experimenting. >> is that all a head fake >> they have now taken it over. >> experiment's over. >> yes whole food's has -- they just

started delivery whole food's has not had a great affinity plan and i fault that for them they haven't done a salesforce.com affinity plan there are 3 million checkers in the country. it's a great entry job don't need to go to fancy college to be a checker but i'll tell you, they are ready are their checkout they are ready with their checkout with this this is like king now. now, this isn't about cheese its. cheese its from the walmart site doug mcmillon -- listen, he's calling jet.com. how many minutes out are the jets like 20 minutes out. doug, they're 20 minutes out, we have to get the jets here. jet.com. that guy is a smart guy. >> i'm guessing the overlay of prime membership and whole foods shoppers is pretty broad. >> can you imagine >> all the data they have on the users. >> they have everything on that. and my wife pushes that button,

the tide comes stop pushing the button, too much tide is coming. their answer is to acquire a fail -- guys, that's bad timing. >> yes. >> yesterday's conference call, oh, my god, the timing is so bad. you know, the german -- they opened in south carolina and virginia yesterday this is the new mall for whom the bell tolls >> de novo, our friend writes, pats walmart on the head, that's good sweetheart, this is amazon's day. >> i don't give a damn. >> is your radar now tuned to -- >> radar >> to what else they will get into or only digest -- >> i don't know, i have to call norad. what else do they need they can literally use this base and use the small store format that mackie had. there's real estate galore we know the mall situation

whole foods is the ultimate anchor for every mall. sears -- they might have a shot. amazon they probably have a master plan right now to be able to explode this thing into -- into 1,000 stores. they have the capital. remember, the struggle with whole foods was margins. buying back stock. pleasing everybody they pleased none. and now their stores are gorgeous and they are going to be -- you could like, you know, you can do all that -- order online, pick up but they can bring it to you i bet you they put drone -- oh, my they're going to have drone fields on the ceiling. right? >> what i'm not hearing you say is that retail is in for a wave of buyouts from tech giants. is this the precursor to that or - >> nobody has -- >> only happen in food. >> nobody has the scale. food is a bad business bad business because it tends to be a tough unions.

bad business because of spoilage and food deflation they can't control these are all in favor of amazon because they have -- they have supply -- no one has ever been able to feed the beast like amazon does. >> right. >> think about where they have all their fulfillment centers. they can buy any amount. they'll know exact my what we want. >> yep. >> they have artificial -- they have the best artificial intelligence remember when you hear about nvidia, remember nvidia, it's their chips. they know what we want ahead of what we -- when we want it they'll have it on the way home. have it in our house wherever you need it it will be -- by the way let's not forget, it can be a show room for everything. they could show room for appliances i don't want to own best buy they could be best -- they can use the whole foods format no keep it at food. let's keep it at food. but i'm saying they can stock more costco is threatened by this. >> i would imagine that one reason why costco -- >> this is going to bring the

market - >> down 4%. >> the retail sector which has been clubbed >> but you would have rather seen this deal happen than say nordstrom's? >> i think nordstrom's get done. >> you do? >> yeah. if i'm nordstrom, if i were the brothers i would be selling it to the private equity because it's just -- it's happening too fast now it's really happening like lightning. matthew boss from jpmorgan he down graded nike yesterday, he has been predicting this vast shakeout we didn't think it would be this fast this quickly in the supermarket business three german companies are in the private, they can lose money. >> by the way, just to put this into some perspective, this is the biggest ever acquisition for amazon it is the biggest ever u.s. grocer m&a deal. we have had a few big ones in the last - >> how does supervalu stay around >> m&a value is still negative which is a comment on where we have been so far this year. >> unless it's strategic like amazon everyone is worried about

taxes. amazon is not that small a thinker. amazon is a big thinker. i think amazon stock going to go up even higher because they have the wherewithal. this grocery business has been waiting for rationalization. i always thought there only be a couple but remember look at the template of what happened. first it was the supermarket then it was the costco and then the dollar stores capitalizing off of food stamps an then walmart refines. target comes in aggressively and then the germans come in with three different companies that they can lose money all they want, because they're private. then along comes the beast the beast. i mean, these guys are the -- belichick is now in food wow. >> yeah. >> don't know. it's a game changer. >> thinking of what's in the ipo pipeline, blue apron. >> yeah. good -- they'll try to pull something off. the bankers are desperate to do a deal you can sell -- you can get a

deal done, make a deal happen. but there's also been private equity in that market. i don't know how those companies -- the people -- i mean, amazon is an army. okay it's an army that you know it's like an army feeds on its stomach. they have a napoleon situation and they can take it by storm. >> the favorite note is from a well known retailer that we have on all the time. i don't always agree with jim, but this time he is not overly excited. >> holy cow, really? i think he accused me of having hyperbole at times i don't know, carl i'm trying to -- i mean, i don't know who to call i mean, i can call walter robb and congratulate him because he's the greatest in the world he is. look, it's not about friends, about money. but when they leave or retire it's about friends i think he always had a fabulous model. this is -- i cannot -- i'm trying to remember at what time that i ever had seen an industry

that just game changed on some sleepy friday morning where all the people wanted to do was be on the 407 this is it. >> we'll cover a blockbuster m&a deal this morning. again, if you just joined us a few moments ago, it hit -- >> you know why it hit, faber is on vacation. it was done to torture faber. >> amazon buying whole foods, $42 a share. we'll talk about that and the nike downgrade out of jpmorgan, downgrade for square, apple making a few big hires in original video content back in a minute the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing. translation?

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[ minion babble ] despicable me 3. rated pg. huge news this morning, amazon buying whole foods for $42 a share and all cash transaction worth about $13.7 billion. seeing a lot of fallout as other retailers in food like costco, walmart, kroger, target, sprouts are all down anywhere from 5 to 10%. we'll talk more about it with jim and possibly david faber when we come back. arl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.

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the opening bell in just about three minutes here on a barn burner of an m&a day it's been slow going so far this year, but this morning amazon completely lights it up, announcing they'll buy whole foods for $42 a share, all cash. big ramifications for retail, for food, for m&a. for janna, jim, they must be having a good day. >> they definitely have. you'll see a lot of the suppliers down, because a lot of the suppliers can be pressured they can be pressured. okay here's the losers. first supervalu, you can't touch that thing and kroger obviously because they have got a big unionized force. they came out yesterday it was not so great target because they haven't solved their food situation, dollar general went into food because they don't have a strategy for low cost provider and cost coe because they can't figure out to make a lot of money in food. yes, they can make it up with the card increase, but not

enough almost all of the suppliers who don't have scale could be pressured here but all these are in trouble there's also albertson's, but that's private when i say in trouble, what i mean is you have to cut numbers because they have to compete they can't lose these customers. now, it's very unlikely that amazon is actually going to, you know, keep the price structure. >> jim, normally when there's a deal like this or a hint of a deal we get levitation. >> i didn't want to put sprout's market on my loser's list because somebody can look at sprout's, but they're not going to do well if kroger came in, could walmart buy them, i don't know these are all -- because walmart needs as many distribution points as possible. >> but the market's not betting on broad consolidation. >> no. because amazon comes in. and, you know, think of retail they're just now thinking, wow, maybe they're -- they're scratching their hides maybe we -- their heads, maybe they're in trouble this is a powerful story of

where they can move. there's so much vacant real estate they could put up whole foods all they want and, remember, they can say next year we'll have a real squeeze on gross margins as we move aggressively into food. people said we couldn't deliver steaks, you know what, we can deliver them they can own grocery i don't know what it does to procter. they're a good stock raider, but the others -- i don't know what to say target is one to watch cornell has to make a move he has to figure out what to do with food. he has not solved it, not solved it at all. >> there's pricing and distribution, but data, i mean, is it really a fair fight -- it's not a fair fight. target versus amazon. >> because kroger has a fabulous data group that has not been able to figure out what to do to spin people off. amazon can do private label food and we'd buy it. i mean, they can go to treehouse -- don't buy

treehouse, they didn't have a great quarter but they could come in against anyone i don't know what to do. i would be calling walter robb and -- if i were target. walter, take control of my food area. >> let's get to the opening bell here and get a look at the s&p on this friday at the big board it is pepsico celebrating the company's community initiatives. at the nasdaq a swedish hygiene and health company so we are going to be looking for a resumption of trade in whole foods, but i assume you would imagine the price gets close to that 42 >> yes, yes. but this is -- i want to emphasize the word disruptive. could walmart overpay for them, it's going to disrupt every aspect of society when you do this this is bedrock america. it is going to make it so everybody in america has more

disposable income. that's what amazon does. if i were the federal reserve, literally -- i mean, i would have a meeting on this i would have a meeting to say you know what, we just got room. inflation is going to go down. this cost -- the inflation -- what's going on, i mean, kroger talked about food. remember they need food inflation because they bring in eggs and then a great essay on deflation by costco two quarters ago in their conference call talking about how much money they can lose as food goes down in price they're going to struggle. can all these continue to go down, costco can answer it but they can't answer without hurting their gross margins. all the people care about in this group is gross margins, gross margins, gross margins. >> even the levels of discounting here not appetizing for you? >> you know, everybody has to cut numbers. they won't be able to cut numbers immediately. because they don't know what the structure is some of the guys will come back and defendquickly and say, you know what, target -- you know, costco has to raise the membership do you need the panic into this?

no because the defense is strident. look at the way they turned on kroger kroger was a darling kroger was like -- that was like benedict arnold. >> sure. remember that chart a couple years ago? >> yes. >> straight up. >> yes 4% comp store sales. now everyone was so happy it was only a minor negative. i don't know what the comp stores will look like once amazon gets in we can't presume that amazon flips a switch they can't just build 800 whole foods immediately. i mean, whole foods had a terrific flight path over a course of three or four years. remember how much real estate is available. this is the dream come true for some of the real estate investment trusts. suddenly these guys come in. >> 15 minutes or so until whole foods we expect will resume. amazon up about 3% would it surprise you to see some of the other players wave a white flag and exit food

>> you know -- >> to the degree they care. >> i have been thinking does target have to go back if target has spent a lot of money trying to figure -- because they're in a strip mall situation. i really think you have to rethink food i think you do i mean, i just don't want to be in the food category it's better to admit right now that you can't compete those who have struggled and struggled and struggled have kidded themselves except for walmart. walmart has been able to leverage their scale and walmart by the way they have a fabulous distribution -- fabulous distribution. >> do you know this ticker unfi - >> yeah, down 9 bucks because people think they'll be squeezed >> at the 2 drop -- a 22 drop. they distribute natural organic specialty foods. talk about margin pressure, that they got introduced to.

>> we can't get some financials, it would be down more than a buck unfi, a little extreme they have some pricing ability but costco down 14 that's a very tough call because costco has -- costco has levers, they have weapons. they know how to compete okay, those who are thinking you know, wait a second, they're going to wave the red flag are you kidding me they know how to play the game costco will be in there tooth and nail as they are with toilet paper and paper towels you're not going to see galanty lay down but the other guys, kroger, crisis in cincinnati crisis crisis. >> if you're blue apron, do you pull this ipo? >> blue -- there's some banker saying we'll have a bad quarter. get that deal done. >> yeah. >> it's just -- i mean, i look at this. i just think that the disruption that happened this morning, i

mean, you know, we have to think -- this is june 16th, the day that's going to live in infamy for an industry look at this this headline, amazon to acquire whole food seattle and austin, holy cow, look at this supervalu down -- did someone think that was a call option for what, for what >> it's going to be interesting to watch how amazon treats a big piece of a new diet like this. >> yes. >> they appear to see -- we'll let them do their thing. >> remember, that is an interesting thing. because whole foods is a high cost producer. remember, the labor there is high cost. now, how long will amazon let them do their thing? but the fact is that the distribution network of this brick -- see brick and mortar has been a huge problem for everybody. except for in food what we always felt that brick and mortar was a savior. because we stop and get food on

the way home, we were always worried about those steaks rotting on our doorstep. like that's why -- you know, steak was the reason why wegman's could never be touched. no, they solved the problem. in one fell swoop they solved the problem. janna set this disruption in motion and it's not going to come back. >> amazon by the way, we mentioned it's their largest purchase ever. largest prior deal was $1 billion 1.1. >> this is big. >> this is big. >> can walmart withstand -- walmart has the family doug mcmillon he's calling the family, we have jet.com, we can give food away if we want to, we can crater this year's earnings. we can pay the dividend and cash flow the other guys they do not have that ability they don't have the ability. it's really a game changer wow. >> walmart obviously would not surprise -- not surprising to

esite as the worst dou component, down better than 5% i'm trying to think of the last time the one analyst day - >> yeah, decided to raise the wages. i'm still trying to get to the bottom of what it means to the suppliers. you really want to be careful selling to suppliers because amazon likes companies that -- you know, they're going to be able to generate a huge amount of what's known as turns if you're pepsi, you'll be able to have more turns for frito lay. people love the pepsi. why do they love it, because they pay them once a month but they turn them ten times they get to live off the float and then as interest rates go higher they'll do well people are recognizing that yes, amazon just took over a gigantic industry by having distribution. the one thing they didn't have and what a find. very cheap remember, whole foods was in the 55, 60 not that long ago before they ran out of room and everyone figured out their game plan dupe who figured out the game

plan -- do you know who figured out the game plan better than everyone is kroger they have a great private label, natural organic. it's not in the ghetto it's right there it's cheaper when we go, we're always like, wow -- >> amazon has private label items on their site. wouldn't surprise you to see amazon green beans. >> i know. you know, i'm just thinking of what i ordered -- i got chicken last night from king's amazon said you like that chicken, you know, what we have -- we have a deal on chickens on the way home we'll drop it off or whatever you need walmart was doing this voluntary drop-off the people who work there might swing by, might swing by i mean, amazon, they have every ability, they could have drones taking off from the rooftops of every whole foods, delivering it to you wherever you are. and walmart's got bonn abus. >> bono bows.

>> whatever, i just read, the wife orders. >> walmart is the worst performing dow stock and nike is second. >> i'm seeing the caterpillar numbers going up nike was -- matthew boss turned on nike. i mean, that was like goldwater turning on nixon mark parker has been curiously silent and i think this is frankly because they have to redo everything to compete with adidas they woke up from their wrong slumber, rumpelstiltskin and nobody knows how do compete. >> he said that north america is likely to get worse before it gets better. >> that's exactly right. i'm looking to see if the real estate trusts that have been challenged are going up because they have the ability to have a new customer -- yeah simon property group that's right that that stock is up because they can take over -- if

there's a sears, sears suddenly has the ability to be something. which is anything but. you know >> yeah. >> now, understand that whole foods initially -- people said wait a second, it's 400 plus stores what is he talking about, cramer that's not enough. kroger, ten times, no. they had a blueprint they were stymied because they had to please investors. they could not blow it out when i met with robb and mackie when they opened that beautiful brooklyn store they announced at my "mad money" that they were going from 1,000 to 1,200. but then they had to pull back because they were afraid of lowering the earnings. remember, when you look at amazon, they're going to struggle with the idea that whole foods has the highest square foot dollar per square foot amazon doesn't need that they will be able to lower costs. it will really be interesting. they can lower costs dramatically. >> so you think that whole foods' reputation as a high end food retailer could come down? >> you know, they have the great

prep food. i don't know how amazon is going to handle the prep food department, but what they're using, remember, they're using it as a base of operations to get the food to you. they can blow it out still a lot of room -- i mean, boston is oversaturated with whole foods. philadelphia, still adding the whole foods. instacart, they're doing a round to bring food. stay at home economy i want to do grand theft auto while i order and drink, you know, constellation beer and play maybe i switch over for a second and do esports. oh, my god, ding-dong, there's the guy with the whole foods stuff from amazon. so this is another part -- i have to tell you, technologically, people don't want to hear it. people don't want to hear it, but i think that your fun is going to be bigger than ever and, you know, i don't think they're going to do private label manufacturing. they can completely re-imagine how to create food at a higher

quality and lower cost for home delivery than everybody else they have that ability because they can be super cheap. home delivery is done for everyone else, you can't compete. can't compete. >> i like the way you were relaying that. >> i'm using my best, i've got everybody on this. you know, this is like all points bulletin. if you have info and i trust you and you're good, come to me right now. >> let's get to bob pisani quickly. we have about eight minutes until we expect whole foods to resume trade. >> we have our eye on that the primary reason we're see seeing weakness even today is because of the amazon effect put up the grocers again walmart's $220 billion market cap. you have walmart down big that weighs on the s&p, costco is probably a $72 billion market cap. when you have the two together down that much, you get weakness in the s&p just want to point out some of the smaller grocers are getting hit rather noticeably.

supervalu. all the names. sprouts. weis, they'll have a harder time competing. i want to give a shout-out to anthony declemente, he had raised the price target on amazon to $1,100 and he was trying to justify that he had 975 it would be faster than walmart and costco, but the primary reason he thought they were going to get faster growth was the amazon was going into the grocery industry he noted it remains one of the largest and most underpenetrated markets for amazon nice shout-out to anthony declemente on that one we had the biggest week of inflows since the elections. etfs hit all the inflows the mutual funds had modest outflows but it's going into the things that we see all year, what we call plain vanilla etfs. s.p.y. which is the biggest out

there and the core s&p the mid cap, all of these plain vanilla etfs continuing to get big inflows. financials had big inflows overall. the xlf attracted more than $1 billion in investments through the week so they're eager to go out and buy banks right now. so xlf is getting big inflows. we talked yesterday about the concerns about the banks that are out there because there's people who are buying banks on a very simple idea right now hoping for a steeper yield curve. the dismantling of dodd/frank and corporate tax cuts and after the ccar numbers come out they want more dividends and buy backs. but none of this happened. they're buying banks on a lot of hopes right now. i want to note, vanguard growth, all the f.a.n.g.s getting inflows. you drop 5% on some of the big f.a.n.g. stocks, people are eager to buy there's definitely a market, a market for stocks slightly lower. the dow is down. >> uber, $3 billion in food delivery, uber is doing.

uber $3 billion in food delivery. you know, amazon could buy lyft. look, nothing's impossible, carl you have to dream big. that's what they do. just to think how big amazon thinks >> you don't think this is a one off for them >> no. these guys, they come in and own. this is not land and expand, this is land and dominate. they need to get the food delivery side done it's entirely possible, it really is, that one of the things could happen. i don't know about lyft. maybe they make a huge arrangement, but ubereats is $3 billion that they do. could tie that up. i mean, that company is in disarray you can make a deal right now. >> that would be amazing as our friend dennis berman said they didn't just buy the grocery stores but bought upper income, prime location for everything that goes with it. >> they can go down scale or upscale. they have the footprint.

what they needed was to -- they're coming in at a time when the real estate investment trusts will beg. please come in, be our anchor tenant you have a sears -- i don't know that's a tough one. >> let's get to rick santelli quickly after we have the housing starts number earlier this morning hey, rick. >> yeah. starts, permits not good revisions, not huge, but in the wrong direction. they do show up if you look at the intraday of ten. but not huge consider we're at 215. we settle at 216 yesterday open it up to the one week chart we settle at 2.15, down a handful. one week of two years the pattern looks similar, but that's automatic scaling thank you, computer. only down one basis points on the week en will we can -- listen we can debate if the fed is looking what the market thinks although that's hard to hand cap.

the long and the short of it, two years of a bigger believer than the long ends affected by the european benefactors, the japanese benefactors in the form of buying. look at one week of bunds they're up at 2. settled at 28s where they're currently trading today. finally, foreign exchange. a lot of people looking at the chart. the dollar index, maybe it's oversimpli oversimplifying, because ultimately you're looking at the same dynamic from a different perspective. it's who's leading the dollar index is leading down rates, well they followed but it seems like it's turned but to be fair, the dollar index, it blurs your eyes a little bit it's unchanged on the week i think it's critical after a bit of a bounce this week to see if it cannot only close in positive territory, but put a bit of a cushion on that carl and jim, back to you. have a good weekend. >> you too, rick thank you very much. rick santelli.

some of these losses are accelerating target is now down 9%. >> very tough. because they moved in so aggressively even that last quarter food was so tough for them i thought it was tough for dollar general very tough for target. now, now what do you do? now what do you do target's trying to come up with the strategy so badly. what do you do supervalu with the incredibly stretched balance sheet. kroger's not going away. they'll compete. a wegman's, a private company can compete. but the guys who have broken models to begin with which is what i was most fearful of with target they're a head scratcher. costco, they'll come up with something. but they won't make as much money. >> sure. we're trying to think of deals, single deals that resulted in so much carnage for others. >> total disruption situation. >> yeah. >> i have to go back in time. >> nothing comes to mind immediately, right >> no. because i can't recall anything

that -- where you just had one guy come in and change the margins for everyone i mean, we have the situations periodically i remember when johnson & johnson came in with the staples and that destroyed u.s. surgical that was only one company. any company that comes in where their margins are raised by going into the industry where the margins are challenged, but that doesn't happen very much. i mean, i tried to -- in the food business or in combinations that brought great scale nothing like this. >> does antitrust occur to you at this point at all or too much of the market -- >> i think that this is the most fractured competitive industry in the world and particularly with the two new german entrants. it would be very hard to anyone to claim -- german entrants, some want to put up 1,500 stores ollie wants to -- that's more than triple than what whole foods has. if i were the german companies i would pull back and refresh my

plans but they can afford to lose money people don't realize the scale that amazon can bring and what they can charge. and what the ability they have to be -- like costco you can go and costco has incredibly cheap food. supply chain amazon can trump that. amazon can trump that and they can stock that store with procter & gamble stuff remember the whole foods brand is a good brand. you can blow it out very inexpensively. >> check out a resumption of trade of whole foods, it's just above the $42 offer price. >> i think walmart would do best to come in there -- how about a battle between walmart and amazon >> would you rule out a bidding war? >> doug, call me right now i'm urging doug to call me right now. because doug ought to step up. how do you compete with amazon

they can offer any amount of kicker but they're getting it too cheaply. we know they're getting it too cheaply because we look at where whole foods was not that long ago. they were a giant -- it was how can they get away with paying less than whole foods traded at in 2014. that seems -- that seems ridiculous to me i mean, here we go 15 -- they were at 55. come on, give me a break, guys you sold too cheaply there's a town hall beginning in a few minutes in austin and who do we have in austin >> we'll work on that. >> town hall beginning right now. we have to get to austin right now. >> interesting -- what does it say to you that a company that spends so much time defending price, right, highly priced sensitive was bought by a company whose original origin was about price insensitivity? >> i think when you comment to the magazine of some regard and

you have been around for a long time and you have fought and fought there's an ultimate sense of you know what, guys, sold to you. i'll move on to greener pastures i'm closer to walter robb than i am to john mackey, obviously i think that walter robb felt to some degree that there's a level of defeat. walter robb is such a great guy. he's the guy who's protected so many of the workers there. i know amazon says they'll keep the worker structure in the end, amazon is a low cost labor company too. i wonder if they put dual classes in the whole foods a dual class, you know, you protect -- this is what the auto companies do remember, they have a huge number of regions in whole foods and they have what i regard as a very fat structure amazon can just get rid of that whole slice which is what i think at that austin meeting they'll be talking about.

>> any question in your mind that activists are emboldened by what happened this morning >> they have to be you have to be careful because a lot of the activists are bumping up against companies that have a huge amount of -- what i regard as dumb money the s&p money and they have been voting too often with the entrenched management but this is going to roil everything what a great case to make for more international investing or be away from anything involving consumer. >> i'm not hearing you argue that this will do to what -- >> no. >> there are only so many to go around >> amazon has wrecked the margins in apparel j.crew, i look at how much that was hurt you see money shift. these big investment funds, giant mutual funds, they have to say okay, listen, we need something in packaged goods. so they'll buy the stock at

mcdonald's because amazon cannot beat easterbrook amazon cannot beat easterbrook. >> we think. >> by the way, steve, you can call me. i'll have that egg mcmuffin today -- oh, no, i forgot i'm working tonight because of this deal sorry, lisa, this deal is too big. this deal could consume father's day. which by the way my daughter said was on an inconvenient day on sunday and we have to move to monday. >> we never got to talk to david in this hour i think he'll give us some color. >> no. remember, it's not game set match for target they can reposition that part of the store. i mean, look, they repositioned pharmaceutical -- the drugstore to cvs don't give up on these things, but i'm saying, yes, the margins have to come down. they'll say on monday, i'm taking down my numbers what an amazing thing that

kroger was like -- kroger was a shakespearean tragedy yesterday. and now it turns out it's part two. part two today. >> kroger the third, yeah. >> wow. >> 0% in two days. >> holy cow. >> amazing. >> yeah, here we thought we may have -- you know, king henry we thought we'd have henry iv. >> i want to squeeze in one more thing before i lost you. google at canaccord, we mentioned nike and square and credit suisse today. does it mean anything? >> no. i think katie huberty's note explained it, how apple was a little bit heavy these are the companies that are winners in this world. but you know what? when you read -- when everyone has f.a.n.g., like f.a.n.g., we have to get f.a.n.g. back to where it's in the dog magazine or something it's too prevalent as a concept and then we'll rethink everything and be able to readjust but i know that there's a lot of panic in this industry right now.

i know that you might be able to catch a bounce. >> you mean food. >> food. but it's a disruptive force. remember what happens with disruptive forces. always think about bunch, burrows, unilever, controlled data, and honeywell. and i'm promoting the fact that i have jenny mow pretty next week it's big week. not unlike february 24, 1944 when the allies did daylight precision bombing. that's it. daylight precision bombing next week. >> that's good. >> thank you for the hour. >> smoking >> "mad money" is tonight, 6:00 p.m. eastern time. dow is down 19 a lot of other stuff we haven't gotten to because we have been covering amazon buying whole foods for $42 a share. back in a minute

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breaking news in the m&a space. amazon buying whole foods for nearly $14 billion we have all the tea tails for -- details for you. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli the dow is down 19, but obviously the storying is going to be the hugely disruptive move by amazon buying whole foods and we see carnage of the other retailers. the market is betting they're in for some tough times at least on margins as amazon moves in we'll watch that story mike santoli, our thoughts on whether or not we're overselling this or not. >> i don't think we're overselling it in terms of economic impact, in terms of the strategic stroke by amazon to essentially become that much bigger and attack a much huger market amazon seems to have to go after the massive end markets and this kind of gives them a head start. the market taking it as just as

a net negative for anyone else trying to play near it >> we have some macro data this morning. rick santelli is going to -- hey, rick. >> hi, carl, yes, it's preliminary because these things can change we're looking for a number, a lot loftier than the 97 camp and we ended up with at 4 -- 94.5. that follows 97.1. the weakest level of the year and then hook in another two months and it was the lowest level since november when it was 93.8 october was 87.2 so even the jump in november this brings us back to that, but that was still a fairly lofty level if you go back and look at the numbers prenovember. let's go through the internals if you look at the one year inflation expectation, contrary to the more recent numbers, 2.6. it remains at 2.6. five to ten actually moved up from 2.4 to 2.6. so we'll have to ponder that

is there any reaction to those expectations on inflation? we're at 2.78 on the 32, they're still in the same spot so we will continue to monitor sara, back to you. >> all right, rick, thank you. breaking news in the last hour as carl mentioned. amazon buying whole foods for nearly $14 billion joining us now on the cnbc news line is jan kniffen, worldwide enterprises ceo. what does this say about the future of the $800 billion grocery business in the united states >> you know, i can't sound as excited as jim cramer was last hour, but i'm pretty excited this is the biggest move we have seen amazon make i mean, they have now put the marker down and said not only are we in the business, but we're going to acquire brick and mortar they have acquired before in the online space this is a big move i think if you're in the grocery space, you've got to be sitting around this morning and going, we thought this was going to get

ugly when amazon came online, but we never realized they aide be really serious about being in brick and mortar we knew they'd test some stores but suddenly they don't have a test anymore they have a real business. i think this is really, really exciting it's really, really scary. it's just one more sector that amazon is going to put pressure on stores. how many stores do you really need this is a big change for this sector. >> you used the word ugly when it comes to what amazon is going to do to the competition we are seeing that play out in the market this morning. kroger shares under pressure walmart shares under pressure and even supervalu getting slammed this morning what exactly do you have in mind in terms of the competitive pressure the companies are about to face? >> well, you know, sara pretty darn ugly when we got the books. it was ugly when we got to electronics and really ugly

since we got into apparel. i don't see why grocery is different. it's a thin margin business already. it's a relatively low return business already and now it's going to be a big new strong ugly competitor who's going to force you to go faster online than you were intending to go which is going to be hard on returns and who's going to take market share which is going to be a problem you know, walmart in 1988 was an end grocery. they went into grocery on price. they went into grocery on volume now, 55% of their business is grocery and they're the biggest grocery player in the country. amazon has done the same sort of thing in every category they got in as walmart has done in every category they got in so yes, i think we'll see enormous pressure all through the space. suddenly it becomes a walmart/amazon game, not a walmart/kroger game. >> you mentioned walmart went in on price if there's one thing about this deal that might be somewhat

striking is that amazon is going for a premium player in the grocery business which has higher margins, access to the higher end consumer and amazon is really not the absolute low price competitor across all of the retail businesses and really what it's looking for is something that links up with the same prime service, a lot of customer data that whole foods does not get about its customers, maybe amazon sees the opportunity there. >> well, i think they probably do but i think they go for both ends of that amazon is in the grocery business on price and everything else is in the grocery store that isn't true grocery on price as well. so they can play both ends of it that's what they're trying to do in apparel playing the bottom end as well as trying to build product that competes with branded apparel. so this is just, you know, we want to take the whole space we want to -- not we want to take part of the space i still think in that area of the business, they don't have a need to make money like they

don't in the rest of their apparel and books and electronics businesses so they can be as aggressive as they want to be. they can invest as much as they want to invest part of whole foods problem has been, they haven't been able to be aggressively investing in the business to win the game amazon can do whatever they want to do to win the game. >> yeah. jan, one last question why is the market acting like there is no answer for these rivals even if were to involve a separate suitor? >> well, because there is no answer for this kind of a play we haven't seen an answer in any of the other spaces. do people plan to compete, but the returns have gone down consistently once amazon got in a space. if you're a suitor, how excited are you to buy in now that you see who's playing against you. >> that's a good point. >> jan kniffen, thank you for jumping on the phone on this breaking story. >> of course, david faber has to pick today to be on vacation,

but david, we thought of you as this news broke this morning we talked about the industry ramifications, but as ramifications for activists too. >> yeah, it does certainly a very positive outcome for janna which has been in the stock as you know for some time. i managed to make a couple of calls and got the sense -- not the sense, got a bit of the calendar here in terms of how the events unfolded. amazon has not been there that long in terms of negotiating with the company, but did show up right around that time that they did a redo on the board of course, being having been pushed by janna to do that and it does appear some of the new directors who were appointed were the key people in sort of bringing this deal to fruition on the whole foods side in terms of perhaps, you know, convincing mr. mackie it had to happen.

ron shaich also, sara, you know very well. panera on that board, having sold his company to j.a.p. then they benefit from kroeger's mishap, the stock being done but the multiples look pretty good listening to jan just now, as we know amazon does brought in a lot of consultants brought in an enormous team to do due diligence and were focused on technology, on the different skus that whole foods has, and what is going to work, what is not going to work and the expectation for shutting down stores is certainly something that was mentioned to me as well as well as expanding internationally. that being for whole foods through amazon's ownership so a lot of different roads to go down here but guys, amazon has been only there for a month or so it would appear in terms of real negotiations getting this deal done as they

did. the expectation being that while kroger might have interest given the stock price and debt constraints very hard to get there. private equity not able to get there in terms of where the price is as well it should be noted a $400 million reverse breakup fee. >> yeah, david, kroger stock price right now, this week, is down 31% including today's 13% slide. i'm wondering if you're hearing anything about what it means for the food companies, which you and i are always asking about in terms of being front and center for m&a these days a lot are getting hit on this. talking kraft heinz, kellogg, general mills, hershey, mondelez, what it means for them. >> yeah. i think the expectation and knowing amazon as i do having done a documentary a number of years ago, as jan was saying, they're going to bring a technology first mindset to whole foods that may not have always been the case and that may mean that certain

things are cut out that may mean that certain skus that do very well will be focused on in a way they haven't been that does seem to be at least the expectation here in the early stages it's got a ways to go before the deal closes and amazon owns it, but make no mistake it's an enormous step for amazon to buy a public company at 13 plus billion dollars, having never done a deal anywhere near this size they'll make sure to wring every efficiency out of it that they can. but it's still interesting to imagine amazon doing a deal like this for a big brick and mortar chain. >> david, it's not big financially relative to amazon's market value maybe 3% but to your point, it really is a big physical foot print here it will add 20 or 25% to the head count obviously a very kind of disbursed physical store presence, which makes amazon less of a virtual business than

it was before. it's not one of those companies a software/network, it wasn't really that. as you mentioned whole foods criticized for being undermanaged, decentralized, not good about technologically, improving the efficiencies behind kind of the store walls what do you think amazon is going to look at this business as in terms of maximizing returns as a grocery chain versus just some kind of foot hold for whatever ambitions the company has. >> i think, mike, i think you have to consider foot hold for other ambitions they have. and international is an important component there. not that amazon doesn't have an international footprint in terms of the commerce the company does at this point. the expectations seem to be they are going to as they always are approach it with ruthless efficiency and therefore the expectation would be that there will be stores -- they're enamored of the 365 plan that they have had, you know, with the smaller stores i guess

and that's kind of where they're going to go but where they go from here or how it exactly transitions to more -- more an e-commerce model is not clear to me at this point right, to your point, is the surprise here. not the dollar amount necessarily, as you say a small percentage, but the head count increase is very significant and running a chain of this typing is gob to interesting i think we can expect for a number of people who work in the stores may be a store at this point, but figure out a way to make it more - >> avid, good to talk to you see you next week. >> you got it. have a great weekend. >> david faber joining us on the "squawk" news line we have an analyst from pacific crest who is talking about the effect on amazon good morning >> hey, good morning >> if there was any doubt that

amazon saw grocery as a key growth strategy, man, that got wiped out today. >> yeah. i mean, look clearly, amazon has been testing delivery, grocery pickup, but this is clearly a very bold move on their part and i think it demonstrates their commitment to having a physical store presence. >> how does that tie in then though with the strategy of putting alexa and echo and other connected devices into every home >> i mean, look, clearly there's lots that amazon can benefit from by selecting data both in store and in home. i think obviously they have been great at kind of integrating the two. so i'm sure there's lots of day they can now collect from the whole foods customers that are largely amazon customers now amazon will have insight into what they're doing online and offline and there's lots of potential there. >> does it make you rethink the stock, ed -- amazon. >> clearly this is a big move on

their part one of the concerns we have at amazon and in the near term is this battle in physical and online retail. so clearly this demonstrates that the battleground is not just online, but online and offline. >> and i guess just to jump off that point, does this represent another avenue where amazon is going to be very rapidly deploying a lot of capital is the street going to have to kind of come to terms okay, is this hitting the gas in another area on another investment cycle that we didn't necessarily see coming >> you know, it's unclear what their near term plans will be. but obviously this is a different capital return profile than some of their other invents particularly in places like aws. so yes, they're going to have more assets tied up in inventory, physical stores so this can change that over

time by the same token, this gives the investor runway on how to grow in a key category like grocery. >> ed, doesn't another -- i don't know, another big player maybe in tech, but certainly with enough cash and firepower have to answer here? >> look, i think there is a probably a lot to the dis -- a lot of discussions happening on how people answer many of these questions, so, you know, look, this again is a very bold move and it demonstrates that it's not just online, but online and offline. >> the price action on some of the other names. kroger going from 30 to 21 in two days i'm not sure what's in your universe, but how much of that is reasonable, how much is overdone >> look, i think, you know, obviously we're seeing all of the retail sell-offs today this shows that amazon is very interested in physical retail. so you know it will take time for us to really absorb what the long earn term implications will be but this is pretty severe.

i'd also add that lytle opened yet, we were at the stores that's another disrupter that people are watching. so you have two big disrupters two days in a row. that's a lot to digest. >> ed, thanks so much. blockbuster news today i appreciate your time very much let's continue the conversation now, talk more about what it means for brick and mortar grocery with us is the prestidi ceo. >> thank you i think it's a home run for amazon i think it's a next step into blending in a combination of internet and a combination of brick and mortar and the amount of customers they're going to gain and use that customer information on a nationwide business is infinite.

and i think that's a plus plus plus plus. and i think it's the next step in the internet from buy -- combining a little of brick and mortar into it. >> i'm a little surprised that you're so optimistic that amazon is going to become your new competitor don't you feel threatened having it play on your turf >> well, you know, it's interesting. but it's a natural evolution and being in the grocery business for 40 years, i have seen a lot of evolutions. and being the last survivor in almost -- one of the last survivors in new york city, so far we have survived since we know how to survive and only the best survive. >> yeah, i mean, what would you

have to do to adapt here presuming amazon is going to be that much more of a competitor for you, day to day. i would wonder about the potential sort of cultural frictions within amazon versus whole foods. you know, whole foods makes a lot of partnering with its workers and paying them generously and things like that. what issues might you see popping up there >> i think that they'll be able probably to deliver organic foods for less they'll be able to negotiate with the suppliers, with the private label organic suppliers become able to deliver it worldwide. not only in the locations around where the current whole foods stores are >> john, do you think grocery in general needs to migrate to a wholesale subscription business?

is that where we're at for five years? if you buy foods you'll likely subscribe to that retailer >> we are investing on internet and online services and we think it has to be a combination of both convenience and internet well, you know, our stores that are left in new york city, at one time we had 200 stores but we converted them mostly into -- they evolved into the real estate business. now they've evolved into -- excuse me, they evolved into the convenience store business in new york city. where we are a place to shop, versus being a regular supermarket. >> john, you know, this isn't amazon --

is this a recognition that to be in groceries you have to be in brick and mortar >> no, i don't think it's a failed attempt i think they look at it as an opportunity and they look at it as an opportunity to gain customer base for the rest of their business and i think it's a win-win-win >> john, based on out the stock market is reacting to this it's clearly thinking that amazon can really expand its capacity in this area. is there enough organic food supply i'm not being, you know, facetious about this they're already talking about how these are not suppliers that have an infinite ability to deliver product to everybody if everybody decided to eat organic so there are stresses along the supply chain that might be encountered. >> there will be stresses and i believe amazon will know how to

handle it. and that we have to grow that business. >> you know the fear with other competitors when they entered the -- when amazon entered the space, the fear was always amazon doesn't care about profits. it can lower prices to grow market share, but supermarkets are a low margin business. i wonder why the grocery public stocks, kroger, supervalu, walmart, are getting hit so hard what do you think is the big threat to their business here from amazon? does it have to do with the profit margins >> to be able to deliver worldwide to every neighborhood into the kroger and they or i o into -- or into -- it doesn't matter there will be a whole foods in every neighborhood in the amazon way. >> yeah. maybe successfully merging the e-commerce brick and mortar grocery strategy for once. thank you for weighing in today. >> the big question i have is

what's the next business amazon will do that with? >> yeah. i mean, people have all kinds of theories pharma furniture. building supply. i mean, do you have -- what's your guess >> it could overnight destroy the drugstore business in the united states. >> you think they could overnight destroy drugstores by saying we're going take some -- we're going to undercut everybody on margin? >> yes. >> and delivery. well, that's something to contemplate for another day, john thank you for calling in today thank you. >> when we come back a lot more on this deal obviously it's the deal of the day. maybe the year so far. stocks at this hour down about 31 points. led lower on the dow by you guessed it, walmart. back in a minute

amazon has made previous pushes into grocery. this of course comes after its big announcement this morning it's buying whole foods for nearly $14 billion we have more some of the previous attempts and what today's move tells us about the future plan, deirdre, wow, what a headline. >> such a headline, sara you guys have been talking about it all morning just going through the details once again amazon buying whole foods for $13.7 billion. that's $42 a share

again, we'll just remind our audience of the share prices, what they're doing this morning. look at amazon and whole foods, not always the case guys that the acquirer shares are up, but investors on both sides certainly seem to like the deal. i want to read you a line from jeff bezos in the press release this morning whole foods market has been satisfying, delighting and nourishing customers for nearly four decades they ago doing an amazing -- they're doing an amazing job and we want that to continue david faber alluded to this, amazon does not typically do deals of this size the biggest up until now have been zappos.com and twitch each for $1 billion but as sara mentioned amazon has been pushing into the grocery space for a long time. this is an $800 billion market and for a decade amazon has been pushing its fresh online grocery delivery service guys, you know it doesn't break out numbers in terms of

groceries but they have been ambitious. over the last year it has been experimenting with brick and mortar we were up in seattle looking at one of the experiments one is amazon go and they have the groceries are delivered right into your trunk. they're getting more than 450 physical whole foods stores and they'll be operated as stand alone. not under the amazon brand for now. i'll leave you with stocks of its rivals, those in the grocery stores have businesses in the grocery space. we see how they have been doing this morning, taking some big hits on this news. >> deirdre, thank you for that deirdre bosa out west. joining us is john springer from supermarket retail news thank you for joining us on a big day. >> thank you for having me. >> you have been covering the business for more than a decade. can you remember a deal that was

as consequential >> off the top of my head, probably not this is really an interesting deal and a combination of two companies that are really innovators in their space. i'm interested to see in how it all works out. >> what have you heard so far in terms of reaction from suppliers, analysts, anybody you have been -- who's now trying to figure out the effect on margins and distribution >> yeah. well, i think it's going to -- you know, accelerate and kind of get whole foods out of the crosshairs of activist investors that have been in their way. and they can probably -- you know, execute the things they need to do in order to get their business back into shape a little bit out of the spotlight now. although this -- you know, this gives a lot of attention, you know, they'd be happy to be able to work out their -- you know, their problems under a new

corporate parent. >> john, to the degree that the other competitors, traditional competitors to whole foods have been trying to counter, you know, kind of its lead in the natural and organic area, what does this leave them with in terms of trying to come one a response, whether it's in terms of price competition, selection, delivery, all the things that might now be challenges? >> yeah. it's not great news for other traditional grocers because, you know, once they were able to -- you know, adapt to whole foods leadership in the natural organic space, whole foods was something of an ally to them because their prices were higher you know, their locations might not have been as convenient and so forth you know, whole foods has got a much higher cost structure than a lot of the grocers that's sort of at the root of their problems now with amazon's parent coming in,

you know, those problems could go away. and it could obviously make amazon a much more significant player in grocery. that's sort of at the back of everybody's mind for the last five or ten years. >> john, what have we learned about the ability to order groceries online i know kroger has been doing its click and collect program. what have they found in terms of success and just how much of the business is dedicated to that online ordering at this point? >> yeah, well, right now the estimates are that, you know, online grocery is only between 1 or 2% of the business. however, it's growing very quickly. and you're right, the companies are trying all kinds of things you know, anecdotal stuff we're hearing from the grocers like kroger that are doing click and collect they're getting incremental sales. there's some belief that it's

hurting people who don't have that offer although you know they're still trying to figure out how to do it profitably. you know, i think amazon is experiencing the same thing. >> john, i wonder whether or not anybody is talking about having to exit food absent, you know, people who don't want to suffer the erosion of margin being forced into the online presence faster than they were otherwise planning. who don't have a waiting suitor at the ready would you expect that or is that still too early to call? >> no, i think that's happening already. you know, typically it's grocers with smaller market shares you know, in markets and those that can't afford to, you know, play this game of building up an e-commerce offering. so that's happening with or without this deal, but you know, i'm sure this is just another event that's going to kind of

accelerate people's, you know, exit from the business if they need to. >> yep fascinating, john. you have got an exciting beat for the next few years there's no doubt about that. john springer, supermarket news retail editor. thanks. >> thank you we do have some breaking news to share for you that we have been reporting on, procter & gamble, according to a source close to the matter nelson peltz trian partners has filed a notice for a board seat on procter & gamble's board that again is according to a source close to the matter we did reach out to them, to ask them if there had been any filings during this current notice period and a spokesman for p&g said they don't disclose that until the proxy which comes at the end of late summer. we don't have a date on that no comment from trian, but i can confirm now according to my

reporting and the source that peltss has filed for a board seat on procter & gamble we have been watching that stock outperform, outperform some of the staples and in a down market got me thinking -- this is a long question since that stake was revealed by trian back in february they'd have a billion dollars in procter & gamble what they wanted this may be a good clue and a good starting point a position on the board. a strong board there are 11 directors currently. meg whitman. jim mcnearney and of course david taylor the current ceo the latest reporting that we have gotten according to david taylor and p&g a few weeks ago there are ongoing constructive conversations as there are with many, many investors they would not comment specifically on whether there are any disclosures which is why i can say that there indeed has been. >> it sort of fits with the notion that we saw once immelt

announced he was leaving on monday that trian -- >> it would be focused on p&g. >> right seeking the -- >> i think it's worthti mentionn the biggest ever position in the company. we want to know what's next and what the strategy is in. p&g is in a strict i can spot -- tricky spot right now. we know it's trimmed down about 100 grands to focus on recent key areas. and so far, it's been a rough slog when it comes to growing that top line. losing market share. the stock is not where it's been in the past few years. it's focused on the categories and trying to keep the profit growth going in the middle of the restructuring to slash $10 billion in costs you wonder if the pressure will continue to ramp up now, especially if this turns out to be that pelts can get himself on the board as a member of trian.

>> watch that. good reporting we're watching the stock action right now walmart is leading the dow lower, down 4to5. think again. this is the new new york. we are building new airports all across the state. new roads and bridges. new mass transit. new business friendly environment. new lower taxes. and new university partnerships to grow the businesses of tomorrow today. learn more at esd.ny.gov

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[ voice remote click ] together: ahhh... that works too. find your awesome with the xfinity x1 voice remote. see despicable me 3 in cinemas in june. good morning, everyone i'm sue herera here's your cnbc news update at this hour. investigators are having a challenging time identifying victims of wednesday's highrise fire in london that blaze was so intense it destroyed a lot of dna evidence in the apartment building. at least 30 people were killed, dozens others are still missing. air bag maker takata is planning to file bankruptcy by the end of the month it was involved in the massive air bag recall due to the deadly defect the bankruptcy will be the

largest in the japanese manufacturing industry since world war ii the democrats defeating the republicans 11-2 in the annual congressional charity baseball game it took place a day after a gunman opened fire while the republicans held their practice. one of the two capitol police officers who returned fire at wednesday's practice threw out the first pitch. and it's golf's equivalent of a slam dunk henrik stenson hit his second shot on the par 4 11th hole, flying the ball directly into the cup for an eagle no bounce. no roll. it went right in really sweet that's the news update this hour i'll send it back down to you, carl. >> thank you very much. leslie picker is joining us to talk about the activist angle on the incredible amazon/whole foods deal. >> good morning, carl. it sounds like janna has made quite a significant amount of

money on today's news, selling to amazon. as you remember they disclosed in an s.e.c. filing in early april they would be pushing for an initiation of a review of strategic alternatives particularly this is a quote from the s.e.c. filing, particularly in light of the apparent unwillingness to engame in discussions with third parties regarding such alternatives i have speaking with sources to understand exactly how much involvement janna had in today's news it sounds like their decision to come into this stock definitely catalyzed some sort of amazon interest but in regard to today's announcement, this is according to sources i spoke with, they were unaware that today's announcement was coming until the rest of the public found out about it now, whole foods before janna came in they had seven straight quarters of same-store sales sales declines which is why they initially came into the stock because they saw it as being undervalued as a result of the

performance. they had a ton of retail experience they helped to edge safeway and pet smart into selling themselves a few years ago and in response to the jana's entrance into the whole foods stock, they changed up the board about a month ago. a month after jana took its stake but that didn't satisfy them at the time it was pleased with the shakeup, but didn't think that new directors, those new directors had the operational knowledge or grocery experience that whole foods needed at the time and at the time whole foods named a new cfo. jana on the other hand, this is according to the sources we spoke with, rejected putting up its own nominees at the time because it would have meant a stand still agreement for two years. obviously i haven't gotten a statement from jana at this time but it's clear they're happy with the outcome because they're making several hundred million dollars from today's announcement just by the boost in the stock price, guys. >> yeah, the p&l today is going to be a thing of beauty, leslie. look forward to more updates

from you leslie picker, watching amazon/whole foods. with us today, post 9 pulitzer prize winning columnist jim stewart who can talk about this deal and his piece with ge and jack welch and jeff immelt were you surprised when you saw this >> very surprised, definitely. i mean, it's absolutely fascinating. first of all, i love whole foods i have been shopping there from the day the first one opened in new york city. i have to thank god it's a great store. but i think whole foods is at a critical juncture. i have been puzzled myself where are they going to go is there a distinct premium grocery store segment that's separate from the giant, you know, walmart, kroger, that sort of thing i mean, they keep flip-flopping on that. i mean, one year they are emphasizing low prices and then they're not. then they are. then they're not so i think they have to resolve that issue secondly i have noticed in the store near me in midtown they're moving kind of in this model

where there's more prepared food they're trying to get away from the commodity grocery store model which i think would be good because, you know, the commodity grocery stores they have the lowest margins of any business there's huge geographic economies of scale which whole foods doesn't have and then the online question. i think there's where amazon is in the big picture how will transform the grocery shopping experience. people are moving towards the online selection and then they go pick it up maybe. amazon itself is experimenting with this. will we see a massive transformation where the brick and mortar grocery store gets threatened >> you have to wonder with the enormous market that amazon has grown with its prime service and how many u.s. households it's ben traited whether that -- penetrated whether that could be a real solution to grocery delivery. >> look, i'm not a millennial so i'm not the best source here but i like going to the whole foods. i think the stores are beautiful. i like mingling in there. >> very crowded in new york

city. >> no one has ever said that. >> okay. >> it's true, i like it. i like mingling. i like to look at the produce. >> lines don't bother you? >> well, they move really fast. >> you must go at 10:00 in the morning. >> no, go after work i don't mind it. i don't think i'm typical so i think there's a new world that people want to be efficient, have it delivered, pick it up and that's where amazon can meld that to a premium food experience. >> you had to get to a certa certain -- a level of logistics where you could be sure that you -- it was going to be cold, it was going to be cold, it wouldn't get crushed in delivery. >> clearly what amazon brings here is a nationwide distribution system that is probably second to none. i mean, walmart's grocery operation does have the advantage of the walmart distribution system. that's been there since ace in the hole and now amazon has stepped up here you know, that is their ace. i mean, efficient delivery and

again, if they treat it as a commodity, low margin business, maybe they can do it with margin. >> now you have the growing sense out there that people are aware amazon is often not the lowest price it's kind of a bundled experience that people are buying into with prime i wonder from the corporate strategy kind of ceo maneuverings a pekts of this which is that john mackey does not want to be on the treadmill anymore. he's lashed out against the activist he is selling this company for not a wild price the stock was at 50, $55 years ago. here it is at $42. i wonder if jeff bezos will be the warren buffett-like buyer of presence it's like an honor for him to buy your business. >> "washington post." >> a good point. john mackey has had mixed feelings about this. he's not going out on top of the game here. it was his baby, a great idea. you know people do love it. he's handed it over to a very

good steward as far as we know of course at some point you have to wonder can amazon really do everything is there a point it's too big to management that's far off into the future i think for now, i mean, honestly investors like this. >> i want to ask you about your piece which looks at immelt's tenure through the prism of really welch's eyes. >> jack welch. i think, you know, jack welch was hailed as the ceo of the sen curry, not just -- century not just the day or the year it's time to start worrying, but a huge reputation. not to defend immelt because the stock price over the last ten years has been horrible. he inherited a lot of problems that were started in the welch's era. overrelines in the capital they were massaging the numbers. jack welch could dip into the honey pot there and make it look good for the investors

that papered over this supposedly brilliant strategy you could be a conglomerate as long as you were number one or two in the market. how profitable are you in every market and what competitive advantage do you have in the markets? as we saw in 2008, ge not only had no competitive advantage, but had a competitive disadvantage because they have no reliable source of deposits basically, immelt spent his entire tenure trying to dig out from under that. >> the only competitive advantage it had was a aaa rating and that went away. >> that's true. >> after you don't have the aaa rating you're just another player. >> so i think people would love to see it slim down. ironically it's the ge that welch inherited. kind of boring, but very reliable executing well well run there are worse things. >> you quoted an analyst who was on our air from barclays who

characterized immelt's era as bad luck do you think that sums it up or more nuanced than that >> well, i think it's more nuanced. i think there are things that immelt could have done first of all, in fairness to jack welch we don't know what he would have done if he had stayed on through this. maybe he would have pulled the rabbit out of the hat and immelt had a lot of problems. but i think he was too steeped in the welch era, they were too slow to begin to repudiate that model and back away with it. now, they have started doing a fair amount. streamlining the company they pretty much did reject the welch thing. but everyone said they should have done it years sooner. >> what do you know about flannery who ran the health care business and his leadership style and track record >> maybe this is my bias, i'm a journalist one thing that caught my eye -- he's an avid reader and i said, good i think avid readers, they tend to be smarter. they can -- they learn things quickly. i think he sounds good you know, his promise of a

review of all the businesses has people very excited that he's going to accelerate this rethinking and reshaping of the corporation. it's going to separate the things that don't belong together. >> yeah. we'll be watching to see how that evolves over time jim, good stuff. thanks very much getting a quick check here in on the markets. on this final trading day of the week coming into today, stocks were pretty much flat for the week and looks like they're a tad bit lower. the grocery companies, we're talking names like kroger, costco, target, walmart, weighing on the major averages and nasdaq getting hit the hardest, it's down 0.4, down more than a percent for the week stay with us for more "squawk on the street." at fidelity, trades are now just $4.95.

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let's check in on amazon and

whole foods. two most hotly contested stocks. you see whole foods right up against the $42 a share bid price amazon's going to pay. who knows, maybe that leaves prospect the market could fetch a higher price down the road never know amazon, obviously their shareholders like the deal as well "squawk on the street" will be back right after this. you know what's awesome?

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watching this amazon-whole foods deal, some interesting things going on with the price of the deal and the market cap that's changed bob pisani watching that, bob. >> carl, i've been calling around trying to figure out a dimpt way to parse this. we've been talking about it all morning and here's a very interesting statistic that i came up with talking to several of the traders here. we know what amazon's paying for this, for whole foods $13.7 billion. but look at the market cap appreciation of amazon today it's $15.6 billion the difference is $1.9 billion on the plus side so let me get this straight, i'm trying to get my head around this, amazon is getting whole foods for free plus their market cap has just gone up $1.9 billion. i find that remarkable by the way, carl, the joke going around on the trading desk right now, jeff bezos was talking to alexa and he said, alexa, go buy me something at whole foods and alexa bought whole foods that's the joke going around

i think it's pretty funny overall. but you get an idea of the valuation here, the street overall actually thinks the deal is additive for amazon's overall value. for free think about it carl, back to you. >> that's a good one, bob. thank you very much. dow's down 44 points we'll talk more ouabt amazon and whole foods as "squawk on the street" will be right back hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go! the market's hot! sync your platform on any device with thinkorswim.

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welcome back to "squawk on the street." i'm morgan brennan in a down day for the markets, the biggest loser, consumer staples by far the worst performing sector in the s&p today. now, it's all about food as amazon looks to buy whole foods for $13.7 billion. food retailers and grocers including kroger, costco and walmart are plunging on that, but so are packaged food players like general mills, kellogg, kraft heinz and campbell soup all down at least 2.5% a piece the only stock firmly in the green within the sector, whole foods. for the week staples are now the second worst performer behind tech before today they were still positive on the week so with that let's send it back

downtown to the team of "squawk alley. guys -- morgan, thank you very much. good morning, it is 8:00 a.m. at amazon headquarters in seattle, it's 11:00 a.m. on wall street and "squawk alley" is live ♪ good friday morning. welcome to "squawk alley." i'm carl quintanilla with jon fortt, sara eisen at post nine of the new york stock exchange obviously our top story of the day is amazon buying whole foods for $42 a share. the deal valued at $13.7 billion. it's amazon's biggest deal eve