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 ever

in its life as a public company at least and the biggest u.s. grocer m&a deal ever. and for the purposes of our hour, which normally focus on tech, a nice intersection between an old, old school business and a new one. >> it's amazing. just from a headline perspective and news that affects people, i can't remember a deal this big i mean, maybe aol-time warner, but you can't eat time warner. it's really a way of bringing things together unlike so many people who are this deal is amazing, i see a number of challenges, potential problems with this deal not necessarily getting consummated, but actually making it work. the logistics operation that you need to run a whole foods is way different from one that you need to distribute using e-commerce if i want cheerios and gatorade, whole foods doesn't sell that so how do you blend the whole foods operation for say produce with the stuff that most people eat yeah, i mean, how do you do all that and be successful while still running whole foods in a way that's really beneficial to amazon's balance sheet, i don't

know it's going to be tough. >> the market reaction is stunning clearly this is a warning shot to the entire grocery industry look at stocks like kroger, which is the biggest u.s. pure play grocer. walmart actually has the biggest grocery business weighing on the dow names like costco and target which have also been big in food up to yesterday, guys, the story in grocery with kroger shares down 18% was a looming price war as everyone was racing to the bottom and it was hurting kroger's margins, caused a 10% lower guidance than people were expecting. today, that is a very different story. it is the elephant in the room amazon, technology, the merging of ordering groceries online with physical brick and mortar and what on earth that's going to mean for the future of this industry. >> kroger 31 and change just two days ago now $24.40. joining us this morning, hans joins us from the new york stock exchange, rick from american

apparel and foot war association ceo to talk about this deal. it's good to have you, hans, welcome. >> thank you, carl. >> a lot of this has happened because of how logistics have improved delivery of food, right? >> right. >> and customers' ability to be assured it's going to be intact once it arrives at your doorstep. >> that's right. i think we see a lot of events logistics here in the u.s. and china. makes easier for e-commerce company to compete and need partners a lot less as a result. >> scott galaway joins us on the phone. man, scott, it's funny, for something that people have been pondering for awhile, this really did come as a surprise. was it for you >> no, just took a victory lap on recode last week, i predicted amazon would buy whole foods i've been saying they're going to buy a major brick and mortar retailer for five years, and it's late, but it is vindication. >> and, scott, though they're saying they're going to continue to operate whole foods stores, they're not saying they're going to continue to operate all of

whole foods stores what do you think they need to do in order to make this work logistically i mean, whole foods famous for putting their stores in highly populated urban environments that are upscale, not necessarily spots that have a lot of room in the parking lot for people to just pull up and have their cars loaded with groceries. i mean, this is a logistical challenge. what do they have to do? >> well, yeah, it is a logistical challenge and no one meets those challenges better than amazon. so this is -- i mean, not to be dramatic, i think this in the future will be seen as the beginning of the end of traditional retail this is the largest consumer market in the world, u.s. grocery, and the most disruptive best managed company in the world just got into it in a big way. >> it is an $800 billion gorilla of a market in the u.s., hans. how ripe is it for disruption like this? >> i think a lot of grocery retailers will be looking for what is their jet.com strategy, who can they buy to help them combat the combination of amazon

plus whole foods but i agree with john thn this o a slam dunk for amazon probably a three-point shot they need to make amazon historically has been more toward the mass market, prices are more affordable, whereas whole foods the price on average tend to be somewhere between 10% to 30% higher than most grocery stores. how do you reconcile that and make sure the product is fit for prime amazon user? >> you don't think amazon shifted from price to convenience years ago? >> they have, but still on average the price on amazon's cheaper on the same than walmart. look at whole foods on average it is more expensive over the last two years we noticed whole food the problem is not becoming more mass market as well but the process hasn't gone as fast as it has been. that's why shareholders are frustrated with amazon's investment, the hope is the push will continue and be faster. but remains to be seen again, i think it's a three-point shot. >> do you have any names you mentioned other companies are going to try to find their jet.com.

>> target, kroger's, safeway, lucky. everybody will be thinking what will be my jet.com >> meaning who buys me or who i buy >> who they buy. a company to give them that online presence. >> but is it a technology company -- and i'll throw this one to scott, that they have to buy in order to respond to this deal or is it more horizontal integration? do you try to pick up maybe a tech savvy retailer in an area where you aren't to try to compete with this, if you're a target for example >> you know, you just have to figure out a way -- i mean, one miss is that the amazon customer is a value customer. they get tremendous value. but the average consumer for an amazon consumer looks more like a macy's consumer than a walmart consumer so this i think this is a perfect fit. but i also think there's a decent probability that kroger's board and walmart's board are

meeting tonight and coming out of those board meetings they will decide this cannot happen i wouldn't be surprised to see this -- >> you mean by one of these traditional grocers? >> you just gave amazon entree into the wealthiest household in the wealthiest urban centers in the world. this is a frightening day for every retailer that is not amazon >> the price action would back that up, but we'll see how long that lasts are you that dramatic? >> not dramatic. but i think i've been through amazon go in seattle, it is an amazing shopping experience. can you see them try to roll that out in whole food stores? it may come to a store near us in a neighborhood, we'll see. >> is it much different than we're used to? >> once you walk in, smartphone, the system knows you're there and you can take anything and

go through a.i. and machine learning they know what you pick. >> a spokesperson for amazon told the times this morning they don't have plans currently to get rid of cashiers and make it this automated experience. >> but over time i don't think jeff bezos does anything that's not disruptive it will be interesting to see what happens next two years. >> have you ever tried to buy sugar at whole foods just regular normal sugar for baking cookies or like flour or salt that's not ar tesal sea salt? >> they have their organic versions i don't know about sugar but flour. >> that's what hans is saying, everybody at whole foods is a prime customer, but a very small percentage of overall prime customers shop at whole foods. if you're going to offer this experience, are people going to get all they want? yes, amazon sells cheerios right now. whole foods doesn't. if i want to get my cheerios and my produce, what kind of soration centers do they need in

urban areas and suburbs to get all those things to me in a way that makes me happy? it's going to be expensive and i'm not sure investors are trading on that extra expense right now. it's going to take time. >> overlap amazon prime users and whole foods users for sure so it will be interesting way to see amazon get whole food to move, more high end and techy or more mass market that's the $13 billion question. >> finally, scott, people are talking a bit about what allowed amazon to be this impactful. one theory is if it hadn't been for web services that that really did change everything for them and it's going to -- it will mean we're in an environment like this one. you agree? >> sure. well, what is provided them is a growth vehicle and cheaper stock to do things like this or ten things for every other company is able to do. but you're literally -- if amazon are the white walkers and

grocery was the wall that kept amazon from every household every affluent household, the wall has been breached here. i think this is a really big deal. >> scott gal loway, hans tung, what a discussion, man good to see you both >> time to dig deeper into whole foods by the numbers our susan li is back at hq with that angle. >> let's do a history walk started in 1978 by a then-25-year-old john mackey in the state of texas going to a mega health food chain with sales now annual $16 billion and more than 465 stores across north america. also in the uk whole foods employs 87,000 around the world and it ipo'd in 1992 at a price of just over $2. so a long way off today's price levels but still trading at below the peaks for whole foods back in 2013 whole foods has seen same store

sales fall since 2015 as other grocers got into the organic health food trend and hence this push to try to shake up the company, replace members of the board, split up that co-ceo structure. and just to give you a sense as to how big whole foods is today, you know, revenue last year for an organic health foods store was at $16 billion that's, yes, that's smaller, way smaller than what kroger sold in 2016 at $100 billion worth of goods. but whole foods brought in three times more revenue than sprouts and supervalu and whole foods is supposed to be a specialty store, right, guys back to you. >> that is right, susan li thank you. with us now, a voice in the industry, ceo of the american apparel and footwear association. let me correct myself here i believe whole foods does sell cheerios, organic cheerios, but there are a number of main street things they don't sell. we're going to talk more about amazon rick, what do you think the legacy of this deal will be 18

months, two years from now how big a deal is this >> this deal is beyond huge. this deal is so exciting i wish i could get as animated as jim cramer was this morning. >> don't we all? >> yeah, i mean, i've never seen anything quite like that for the world of retail, which needs some exciting and encouraging news right now, this is absolutely monumental this is equivalent to iphone, ipad, imac moment. this is going to change retail but for a lot of reasons that i think some of your folks may be missing. you know, if you go back to the walmart deal last year where they bought jet.com, remember walmart was already heavily into the grocery business but walmart at the time only had 8 million products listed on their website. now, one year later, they've got 20 million products listed on their site now, amazon has a huge number, i think it's like 300 million. so think about that.

think about what walmart's numbers have been just in one year by combining themselves with online in an effective way. and then take it to the next level. look at this deal. this deal you would think that whole foods for sure has millennial customer. guess what, they also have the boomer customer. and guess what amazon has not only the millennial, the boomer but it has the act general narn because they've been buying books for years. you're crossing a wide spectrum of people who can shop online now. and think about this, the older group is more comfortable with amazon they know how to buy so now i'm going to buy grocery. >> but, rick, what do you do about the fact that it's sort of a running cultural joke, whole foods being referred to as whole paycheck especially when it comes to produce whole foods shoppers paying three times more for an orange than people who are going to your mainstream grocery store.

whole foods supply chain is set up for that. is that good enough for amazon or do they have to augment this deal with a whole lot of other expensive moves to serve the broader amazon customer? >> look, here's what's going to happen whole paycheck is going to become whole market because people will take to it not just the young ones, every age group. and those people who get confused at checkout, like i always do between whether i'm in a green lane, purple lane or orange lane, aren't going to have that problem anymore. they're going to know how to go online, they're going to know how to buy and they don't mind paying the price. they just get confused by the store. so i think they did the right thing at the right time. this is an incredibly, incredibly interesting deal. it's very good for retail. >> incredibly interesting, an understatement if anything thanks so much, rick, for your

perspective. >> a lot more still to come. we'll watch that stocks are off their session lows of the big f.a.n.g. stocks amazon is pretty much the only one in the green right now we're back in a minute post 9 is sponsored by fidelity iesennvtmts, innovative ideas for serious investors. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.

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♪ watching the stocks of the day. the action in amazon and whole foods both stocks are higher after amazon announces this morning it is buying whole foods for $13.7 billion. joining us now is ubs managing director eric sheridan and on the phone, raymond james senior internet analyst aaron kessler. gentlemen, welcome to you both you both cover amazon, so i'll start with you, eric what message is amazon sending with this purchase of whole foods? >> this is another step in the evolution of amazon. amazon has always struggled in some of the categories that under index to e-commerce, groceries, consumer packaged goods and apparel. we think this move today moves them well far ahead in the grocery space. amazon fresh has had a slow rollout over the last couple years, yet as we talked about earlier on the earlier panel, it is the largest share of wallet for u.s. consumers so this lines up very well with

their prime strategy, very well with expanding category, very well with expanding their wallet share of consumer homes. >> so pretty bullish aaron, let me ask you, you know, whole foods wasn't doing all that great recently as a public company. it was trying to shake that whole paycheck kind of image and amazon fresh in itself was having struggles penetrating the online grocery category. why then is everyone so excited about the combination of these two ompanies >> yes, for amazon it's clear they wanted to enter this category, it is a $700 billion category one of the largest obviously in terms of consumer spending and it doesn't really expedite their path to the grocery market so i think as eric noted they've been struggling a bit in the groceries with amazon fresh. they've rolled out only about 21 since 2008 haven't really figured out more how that works definitively thus far, especially the chill chain of trying to transport fresh produce. i think they've struggled with to some extent

i think whole foods helps address this the debate will be what do they do with their amazon fresh business, do they just rely on whole foods to be the distribution platform now. >> eric, do you think this means amazon has to spend more or less to achieve a national mainstream grocery footprint. whole foods is not everywhere, and they don't sell mainstream groceries. so how do you make -- how does this fit into making that a reality? >> well, i think there's two aspects to that question one, amazon prime isn't focused on all americans it's focused on a certain amount of income, a certain amount of gdp density. we've done a lot of work at ubs focused on who a prime customer is it's a $90,000-plus per year annual income household, highly concentrated in urban and suburban areas. >> but they still eat doritos. >> yes >> they still eat doritos and drink coca-cola. >> and they have two strategies that approach that as well

prime pantry go right after the cpg category and prime now in 31 cities around the u.s. for two-hour delivery of a lot of the staples and household products that you're focused on. this past weekend i ordered plenty of cereal and gatorade from prime now, it was in my apartment in new york city within an hour and a half. i didn't go to a store to get that >> aaron, what do you see amazon getting here when it comes to distribution, product, assets, data from whole foods? how are they going to utilize it >> yeah, so it should give them more data in terms of the consumer what they're spending on obviously amazon already has a lot of that, maybe not so much on the food side i think to your earlier question about expansion plans, i think there was some concern around cap x spending, building warehouses, additional distribution platform they would need for that. this might help alleviate some of that concern -- >> but how does it how does this alleviate that because you still need lower

cost produce, you need to get those doritos and that mainstream sugar from somewhere. and sort it into the same flow that's going to these households, don't you? >> yeah, you still need that, buying a platform that already has the infrastructure in place. you can say, yeah, they're going to expand but only have 20 amazon fresh locations today to go from 20 to 50 long term i think that would require much greater cap x on their part. >> finally, quickly, now we know amazon has an appetite to do big deals since the last one was less than $1 billion, anywhere you would be looking next in the retail industry? >> well, i think for amazon it's all about blending online and offline going forward. so i think i'd come back to those under indexed categories, apparel, cpg to jon's point, how do you sell everything that a household needs? and how much closer do you have to get to household location to be able to improve the roi and the economics of that? i think that's the calculus amazon's going after >> wow, that opens a lot of

possibilities. we're going to leave it there, gentlemen, thank you for jumping on this story for us, eric sheridan and aaron kessler. >> when we come back, a lot more on a massive change for a big industry we'll talk to steve odland and bill george. they'll break down this morning's deal today "squawk alley" continues in a mome [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock.

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♪ jeff bezos single handedly upending an entire industry this morning. supermarket big box shares dropping on this morning's deal. bezos, quote, 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 let's bring in cnbc contributor steve odland, former president of the food services division at sarah lee, board member of general mills, on the phone

former target board member, bill george bill, let me begin with you given your experience, how do rivals answer this >> first of all, never underestimate the power of creativity and aggression of jeff bezos i think you can see by their stock they're all very, very concerned. there's no question that the multichannel strategy that brian cornell put in place is exactly what jeff bezos is doing you have to have home delivery, drone or something else, we are going to move in that direction. and bezos is going to totally transform whole foods market as a vehicle to aggressively attack target, walmart and kroger and other major players in this industry so i would never underestimate what he can do. >> so no doubt in your mind that the prices we're showing on your screen now, and all that red illustrates the money they will have to spend or sacrifice in getting up to speed online

faster than they would ordinarily >> i think so. remember, bezos got this at a good price this is a $50 stock four years ago, two years ago a $40 stock you know, he got this -- or $60 stock. and it was $50 two years ago so he got it $42 he's getting it on the cheap and his stock reflected it i think they're going to have to look much more aggressively online that game is out there and that's what they have to play. and they have to compete whether they like it or not. >> steve, with your experience in retail, is it an understatement to say this is a deal and a day where retail will change forever >> well, i don't think it's an understatement i spent half my career at the quaker oats company in food and then i was the ceo of a grocery retailer nobody knows more than me how important the food business is to the united states it's over $1 trillion industry

in and out of home, number one number two, it's totally noncyclical. and it's something that amazon has been trying to penetrate for some time. with limited success now, most of that's been because they focused on pantry and the staples, what we would call the center of the store in grocery retail but all of us in grocery understand that the driver of your food choice is perishables. and so primarily that's produce and meat and they have not been able to crack that one the addition of whole foods here gives them 450 retail bricks and mortar locations in 42 states. so a national footprint from which they can take very high quality produce and meat and leverage that into the staples that they had in amazon pantry amazon also has been trying to get to a delivery system through fresh direct delivery, and they've done limited amounts of that in urban areas. this gives them a platform from

which to leverage that in all 50 states >> steve, i'm wondering how much do you think amazon is going to have to spend in order to combine the supply chain of logistics operation for whole foods produce with the existing logistics operation that they have for prime pantry and amazon fresh? because these are two different operations you've got to sort that somewhere. i imagine you need refrigeration facilities in places where you might not have them already. how hard is that how expensive is that? how long is that going to take to execute >> it's a very goodquestion because now they have two separate supply chains i've toured an amazon facility in seattle a couple of months ago with all the robots. and you could see all the movement and it works very well with staples it just does not work with the fresh side so i think they came to the conclusion that they needed a separate supply chain for fresh anyway and they were either going to have to buy or build this gives them an access to that with a relatively cheap

acquisition. now, if it gives them a national grocer that has a national -- relatively national footprint. the stock was beaten down as we've said before, it was not doing well on its own, so this gives them a chance to leverage that without having to build it. so i think right now they'll operate them as semi-autonomous and we'll see what happens the issue is going to come in in pricing because they not only have to hit price points that are reasonable for the amazon consumer, but they also then have to blend that with the bricks and mortar retail so i think you'll see price points come down in the bricks and mortar whole foods stores while they blend this supply chain. i don't think you'll see anything overnight but over time they've got to homogenize these price points on their online and their bricks and mortar. >> right can i touch on that? i think steve is right we all know that the foods going down, millennials want fresh

foods. i think whatever amazon's going to have to spend, bezos spent it to merge these two whole foods has enough standing fresh foods delivery system, obviously too expensive prices will definitely come down. whatever he has to spend will be less than what kroger and walmart and others are going to have to spend to compete so i think he will do that and i think the key is delivery, fast delivery or fresh food. that's the key to the whole thing. >> bill is exactly right the other thing that i'll point out very quickly is the tax situation. before amazon was benefitted because they did not have bricks and mortar retail, so they did not have to collect sales tax in most of the states now with a 42-state bricks and mortar supply chain, they're going to have to once they close, they're going to have to start collecting sales tax in all 42 of those states, which i think added to their other states that have that law will be virtually all of the country. so the prices then will come up

on everything else in the supply chain for amazon to the consumer this is going to be a big deal that i think we're going to have to focus on in the coming days how is that going to impact their value proposition across the rest of their supply chain >> yes we remember when those taxes were a big story it's going to be a learning curve on both sides, i think we can all agree. steve and bill, we got to move on, but appreciate your time very much. good to talk to you again. >> thank you, carl. >> great to be here. don't want to lose sight of the european close, which is happened moments ago seema mody back at hq with the rundown. seema. >> hi, sarah european markets mostly higher today helped by news greece's agreed to offer more bailout fund but overall decline for the week unable to overcome monday's tech selloff. but guys, this amazon-whole foods deal is impacting supermarket operators across europe one of the biggest losers, the dutch parent of the stop and shop and giant grocery chains in

the u.s. tesco, that's uk's biggest retailer also down sharply deal overshadowing news of tesco's best quarterly sales performance in years sainsbury also in the red. and carrefour which is in the midst of a leadership transition, amazon deal comes as privately held german grocer aldi expands in the u.s. just goes to show that the supermarket battle extends overseas. >> absolutely. just as those german retailers and grocers were expanding their presence seema, thank you let's get back to sue herera with a news update hi, sue. >> hi, sarah thank you very much everybody. here's the news update this hour, president donald trump confirming an fbi investigation today through a tweet. mr. trump writing, quote, i am being investigated for firing the fbi director by the man who told me to fire the fbi director which hunt end quote. the president may be referring to deputy attorney general rod

rosenstein who in a memo to president trump raised concerns over comey's performance jurors in the bill cosby case returning for a fifth day of deliberations. the jury now saying it has questions about reasonable doubt and wants to hear part of his sealed testimony repeated. yesterday the jury told the judge they were deadlocked, but the judge told them to try again. london police say that they've arrested a man with a knife today near parliament. it comes just months after a man barrelled his car into pedestrians on nearby westminster bridge and then killed a police officer in a parliament courtyard the latest incident though is not considered terror related and there were no injuries and a truck carrying hundredso pounds of fireworks catching fire in northern idaho the driver lost about $25,000 worth of fireworks in that explosion. unbelievably nobody was hurt whoa that is the news update at this hour back downtown to "squawk alley." jon, back to you >> all right, thank you, sue

and up next, amazon's acquisition of whole foods and the impact on big tech and grocery. the ceo of boxed is going to talk e-commerce, grocery delivery and the potentially industry changing deal when "squawk alley" returns

let's keep the conversation going on this morning's block buster m&a deal. the ceo of boxed, ed lee

managing editor at recode. welcome to both of you amazon, whole foods, you don't do produce, but you do things that sell in biulk, some in boxes, some not. how is this going to change your life >> so we still have to be disciplined in what we do. we sell a large format of items, limited skew we're more akin to costco, bj's or sam's club than whole foods or any of the offline traditional grocers. but this changes the entire industry as you've been talking about all morning. looking at it seeing how the equities analysts are reacting, how traders are reacting this is that momentous moment i think for our generation when it comes to offline retail that it's going to change literally how the playbook is going to be run going forward. and what i mean by playbook is that, you know, over the last 100 years retail has been changing to this kind of offline superstore format. but now how does this change that is there going to be a fulfillment center on every street corner now? this is just really, really

interesting stuff. and what a time to be in this industry literally what i woke up to today. >> and so many people talking about jeff bezos this morning like he's superman of course this is going to work. how is everybody else going to survive. what's your take >> well, i think they have a right to be concerned, absolutely the take said going after grocery, yes, he is, but this is really a real estate deal, a distribution deal ultimately he wants to create the operating system for retail, if you want to call it that. and i think the piece of the puzzle he hasn't been able to crack for so long is the same-day delivery part, right? grocery's a natural fit for that he's still trying to build out that part of it. having warehouses or having in-store locations where you can hold onto inventory and ship them really quick, i think that's a big gain for him in this deal. >> i think the other big surprise was, well, two, of why analysts who follow amazon and watchers are surprised number one, their last deal they did in terms of size, that was

anything even remotely close was $900 million for twitch. >> yeah. >> so nothing like that. >> this is 14 times that. >> number two, opening a bookstore here in new york city is a far cry from buying whole foods with retail footprints all over the country i just wonder what it says about amazon's strategy from now and how much of a rethink we need on it. >> he's trying to get the margins on everything, right he's trying to sort of win the whole system of delivery, the whole system of retail it's not just owning inventory and selling it he's trying to find ways to disrupt that part of the whole chain. that's the best way to think of this deal. he wants to sort of operate to help ultimately all the suppliers, all the vendors instead of necessarily sort of owning every part of the footprint -- store footprint that is to say. >> cuban has an interesting take, the amazon question is can they get you groceries to you faster than you can get to the store to shop in an uber-lyft world. so the notion of you driving to a store to grocery is in cuban's view is already obsolete.

>> yeah, i think that's generally right. when you look over the next 25 years, how could anyone imagine a world where we'll shop for groceries like we shop today it just won't happen anyone who believes that just doesn't understand retail. but throughout the conversation you guys just had i harken back to when i was on the show years ago when we first started boxed and at that time i thought what i told investors was right in that this whole game is whether technology folks like amazon, like us, like all the other technology plays out there, can they figure out retail faster than the retailers can figure out technology and that was the race. and so this buys him an ultimate shortcut to that race because that opening to little library, bookstores, tiny groceries, convenience stores they were going really slow and i think he said screw it, we're going to get us in the race. >> sounds like data versus content, right >> yes. >> companies with data want the content, companies with content want the data. >> amazon's getting both they're ultimately going to get both out of this

that's the thing to cuban's question, i mean, two-day shipping is not fast enough for most of us, right we still like the idea going to go to the store get the thing i need right now if you can get it that day, if amazon can get it to you that day, there's less reason to go to the store, right? so that's the long play in terms of, you know, what whole foods might mean for them. >> and you think about if jeff bezos is playing the financial game in terms of thinking about market caps of the companies he's going up against in the grocery world, this is the way to kneecap the entire industry vir which yo virtue of them having fulfillment center, amazon does not have, but what are they going to stay in the next earnings call? >> how long will we know whether this is working for amazon 18 months, two years. >> i think we'll probably know within 18 months, but i think they're just beginning, man. when he made this decision, this is like a 10, 20-year decision.

>> got to leave it there thanks have a great weekend. for more on where amazon's efforts and grocery stand today we turn to diedre bosa. >> amazon has been pushing into the grocery space already for a decade with its fresh online grocery delivery service that started back in 2007, but guys, online grocery hasn't picked up as quickly as some may have thought. people still like to go to physical stores, they like to pick their own veggies and fruit. now, online sales are expected to grow, but for now the market is still mostly in physical stores and amazon has given us hints that it's been looking at an online/offline hybrid approach a few months ago we were in amazon's hometown of seattle and got a firsthand view of its grocery brick and mortar experiments. they're still experiments at this point there's amazon go. we've talked about this. automated grocery store eliminates the entire checkout process. it opened late last year and still only open to employees there are also two amazon fresh pickup locations

that lets customers order online, get groceries delivered right to their trunks. it's placed there. all they have to do is drive in and drive out. the question now is how does whole foods fit in the deal of course gives amazon more than 450 physical locations, but good question is could you see some of that amazon go technology integrated into whole foods stores in the future and amazon spokesperson says no plans at the moment. >> all right thank you very much. when we come back, a lot more on the amazon-whole foods deal. we'll talk to a grocery store owner about the impact on his industry and at 4:00 don't miss bill miller, long-time value manager, stocks off the lows, dow's down 6. ba aer bak ckft are whoooo.

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i'm scott wapner, coming up today on "halftime report," amazon, whole foods deal and where amazon is going to strike next plus, snap shares drop to ipo price. one analyst says don't worry, that stock's about to soar he's with us live. and top retail analyst matthew boss of j.p. morgan just threw in the towel on nike after having a buy rating for years. sarah, see you in about ten minutes or so. >> that was a big call looking forward to that. scott, thank you back to our top story, amazon buying whole foods this morning.

stocks of supermarket chains getting rocked it's across the board including walmart and costco consumer staples are the worst performing group right now on the s&p. joining us now is stu leonard jr., the new ceo of stu leonard grocery store here in the tri-state area employs more than 2,000 people, five locations, opening your sixth this year thank you for joining us, stu. so what's your reaction to the fact that amazon is getting in on the grocery game going all-in on whole foods, bricks and mortar, how much does it change the equation >> you know, i've been in the business over 40 years and i think this is one of the most dramatic things that has happened in our industry right now. i've seen costco open, i've seen all of the different warehouse clubs and super hypermarkets and all of that, but i think amazon buying whole foods is a game changer in our industry. >> explain what you expect to see. so amazon now has control of 431

whole foods stores how is that business -- how is your business going to change? >> well, i would say they're going to have to figure -- they're going to have to learn how to sell fresh fish and lobsters and get their meat and products, which amazon is not too keen on right now. but i think the technology part is is going to revolutionize the way people are going to be buying their food and getting it delivered. back almost 100 years ago, our families started in the home delivery milk business and then we had dairies. and now, i see amazon probably it's going to be 360 degree spin right now. we're getting back into home delivery again and amazon will push that. >> stew, what is the challenge here in combining technology and grocery? is it convenience so that people

can get out of a physical store faster or is it delivery so the people don't even have to go to the store and they get it at the house or is there something else >> i think a few things are happening. one is the cost of getting it delivered that that last mile, which has been high. that has been dropping and it's getting less expensive for people to get it delivered to their house i think the second thing that's happening, of course, with the pli millennials now, they're just busy my daughter now is 31 and eng e engaged and both her and her fiance work and they just expect really to go on their iphone and push an app and just about get anything delivered that they want i think that's what we're going to see happening to the food business it's going to go much more online now with amazon moving in and i think the retailers now, we're going to have to get a

little snappier as far as what we're doing in the stores in trying to create a really exciting retail environment for people to visit. >> you know, stew, for a long time, we know what's happened to the american mall. it's easy to order a shirt online people said it's different with food you want it to be fresh. if it's hot, you want it to be hot, if it's frozen, you want it to stay frozen by the time it gets to your door. if ththis has been solved, is ta category that's safe is home depot safe because it's hard to bring a big bag of fertilizer back home or get it delivered? >> well, one of the things everybody loves to do is shop. and what we've done at the store is tried to make the shopping ek appearance fun for the customer and the family with lots of, we make a lot of fresh products right onside, you're watching

them make mozzarella mentum moza buys and our butchers are cutting these big beautiful rib eye steaks customers love to come, they can touch it and feel it and buy fresh. if you can create a nice show and we have a lot of an information, they call us the diz ney land of dairy. if we can create a fun retail environment, i think mer rs still going to want to go out and shop, but they're going to want to do a lot of their shopping online. like cereals and water and health and beauty aids and things like that >> we'll see how it plays out. >> thank you for jumping on the line today on this breaking story. the co of stew leonards. we'll be right bacin men [vo] when it comes to investing,

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we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be. couple of quotes here from whole foods ceo. in texas monthly, he says we need to get better and we're doing that, but these guys want to sell us he's referring to activists because they think they can make 30 to 40% in a short period of time they're greedy bastards. in 2015, a profile in business week says this amazon fresh foray into grocery delivery will be amazon

waterloo can't beat them literally join them, jon. >> and i wouldn't ignore the data aspects of this they're a premium retarial if they can get people to pay through prime, you can correlate that >> mackie coming out on top, he's got a 27% share price surge. stays on as ceo with amazon. see what happens >> over to the half. top trade this hour, supermarket superdeal, what amazon's stunning buy of whole foods means for everyone else in that space and how it's yet another sign big tech the is taking over the world. with us today, jim, josh, jon, courtney gibb on is here, the president of loop capital. also is is ross levinson, the tech and media insider cnbc contributor as well joining us onset we begin with amazon's deal for whol