Amazon's Whole Foods Division Gets Savage Review by This Stock Analyst
No love for Whole Foods by one analyst.

Amazon (AMZN) better start upping its game when it comes to turning around its shiny new toy, Whole Foods Market.

"In general, it has become clear to us that while Amazon has lowered prices on select items at Whole Foods and signage has meaningfully increased (as well as a few select merchandising experiments), little has really changed at Whole Foods (except possibly weaker execution given all the out of stocks)," said Barclay's analyst Karen Short in a note Tuesday. "Until execution issues are resolved and broader price cuts are implemented, we believe traction on sales will stall, so for now the pressure on the industry has abated."

Short pins the blame on Whole Foods' stalled turnaround since Amazon's Aug. 2017 takeover on two factors.

First, the organic grocer is still dealing with out of stocks across categories (see Instagram post below) as Amazon installs a new inventory tracking system. If the item isn't on the shelf, people can't buy it -- simple equation. Further, Short's research suggests Amazon has stopped aggressively slashing prices as it did instantly when the Whole Foods deal closed. Amazon used that moment to cut prices in everyday essentials like fresh fruit, for example, to drive traffic. The goal: work to quickly shed Whole Foods' "whole paycheck" image among deal-seeking consumers.

Whole Foods' inability to run roughshod over the grocery industry under Amazon's umbrella could easily be seen. 

In December, Costco's (COST) same-store sales grew an impressive 11.5%, topping Wall Street's estimate of just 8.1%. Online sales surged 33%.

According to Gordon Haskett analyst Chuck Grom, December was the fifth-straight month Costco reported double-digit total sales growth. The long-time retail analyst said the result is a "testament to the [Costco] model, which is generating strong comps from both new and mature units."

To add insult to injury here: Short says she has yet to see anyone using the Amazon lockers the internet giant quickly installed at various Whole Foods locations. Ouch.

There is a great chance TheStreet's Executive Editor Brian Sozzi and Correspondent Scott Gamm will talk about Whole Foods' issues on Morning Jolt Wednesday morning. More from the Morning Jolt Archives:

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