Dive Brief:

• Amazon-owned Whole Foods would be a good fit for about 110 empty Sears and Kmart stores across the country, BMO Capital Markets wrote in a note to clients on Wednesday. The firm’s estimate is based on the demographics of the area around the department stores and the lack of a Whole Foods locations nearby.
• BMO analysts also said there are 320 Sears stores that could work for Amazon’s “value” chain or for a grocer like Lidl. In all, Sears’ has about 430 locations that are available for use by another retailer, 260 of which are in the process of closing and 170 of which are currently sitting vacant. 
• Amazon and Whole Foods also announced the expansion of their one hour Prime Now grocery delivery in additional cities including Asheville, North Carolina; Charlottesville, Virginia; Columbia and Lexington, South Carolina; Little Rock, Arkansas; Manchester, New Hampshire; Mobile, Alabama; Naples, Florida and Savannah, Georgia.

Dive Insight:

This report builds on news earlier this year from Yahoo Finance that Whole Foods has been eyeing former Sears and Kmart sites for store expansion. These sites, many of which anchor mall developments, offer an opportunity for Whole Foods to expand into new markets in a cost-efficient manner.

According to sources interviewed by Grocery Dive, mall anchors can be secured for less than the strip mall locations so many grocers prefer. With their large box size, mall sites offer a venue for retailers to build splashy, experience-focused stores that draw shoppers from far and wide. Amazon, despite it reputation for austerity, has shown it's willing to bankroll lavish locations like Whole Foods' recently opened Atlanta flagship, which includes numerous dining options, a rooftop bar, unique prepared foods and an old-style butcher.

The formers Sears and Kmart sites, moreover, offer potentially valuable real estate in places where not much is available. 

"There aren’t many developers that are building additional, ground up, retail space, so if Amazon, or others, is looking to grow somewhat rapidly this would be a quick and likely cheap(er) way to expand,” wrote BMO analyst Brandon Cheatham. 

However, a widespread expansion across cavernous former Sears stores may be a stretch for Whole Foods, whose stores measure 43,000 square feet on average. Depending on circumstances, the space could be split up among multiple retailers, as is the case with a 27,000-square-foot Fresh Market that now occupies the northwest corner of a former Sears in Virginia Beach.

It's also hard to gauge Whole Foods' expansion potential as Amazon continues to tinker with pricing, and as it works on a reported new grocery chain. The e-tailer has had a hard time lowering prices at Whole Foods — the latest round of cuts notwithstanding — and getting the cross-pollination between shoppers and its Prime membership program that it so desires. 

Still, the opportunity to occupy once celebrated department stores could be too good to pass up. That's certainly proving to be the case for other retailers, including Stew Leonard’s, which began renovating an 80,000-square-foot location at New Jersey’s Paramus Park Mall formerly occupied by Sears. Wegmans also operates a 146,500-square-foot store at the Natick Mall just west of Boston formerly that was formerly home to J.C. Penney — another struggling department stores whose struggles could provide opportunities for supermarkets.