Amazon Cuts Back on Stores, But Still Wants to Sell You Groceries

Amazon CEO Andy Jassy says the internet retail giant is 'working hard' at making its grocery business successful.

This ain't no Supermarket Sweep.

Amazon  (AMZN) - Get Free Report said it will be taking a pause in the expansion of its Fresh supermarkets and cashier-less convenience stores as the company looks to come up with a winning formula.

CEO Andy Jassy delivered the news to analysts on Feb. 2 in what has been described as his earnings call debut.

Amazon, which acquired Whole Foods in 2017, posted better-than-expected fourth quarter revenue on Feb. 2, thanks to solid gains from its Web Services division, but fell shy of Wall Street’s earnings forecasts.

“I'd just start by saying that we think grocery is a really important and strategic area for us,” Jassy said, according to a transcript of the call. “It's a very large market segment, and there's a lot of frequency in how consumers shop for grocery.”

There are a few dozen Amazon Fresh stores and Jassy said “we're doing a fair bit of experimentation today in those stores to try to find a format that we think resonates with customers."

Amazon Sees 'Encouraging Signs' in Groceries

Amazon will not expand the physical Fresh stores, he said, "until we have that equation with differentiation and economic value that we like, but we're optimistic that we're going to find that in 2023."

"We're working hard at it," he said. "We see some encouraging signs. And when we do find that equation, we will expand it more expansively. But I think that we have a very significant opportunity in the grocery segment."

The company said it took a fourth-quarter impairment charge of $720 million that includes closing certain stores “with low growth potential.”

Amazon announced its Amazon Fresh store in 2020, describing it as “a new grocery store designed from the ground up to offer a seamless grocery shopping experience, whether customers are shopping in-store or online.”

The company has been installing its "Just Walk Out" technology at some of its Amazon Fresh and Whole Foods locations that allow customers to buy items without having to go to a cashier.

Earlier this year, Jassy confirmed the tech and online retail giant is preparing job cuts affecting around 18,000 of its global workforce, amid what it called an "uncertain and difficult" global economy