stocks and shares of companies that sell groceries are now spoiled in
the eyes of investors after Amazon announced a nearly $14 billion
purchase of Whole Foods Market on Friday.
Following Amazon’s move to plant a bigger stake in the food-selling
business, shares of Walmart tumbled 4.6%, making it the biggest loser in
the blue-chip Dow Jones industrial average. Walmart, the world’s biggest
retailer that generates more than half of its revenue from groceries,
lost more than $11 billion in market value.
Target shares fell 5.2%. Costco shares closed down 7.2%. Supermarket
chains also took big hits, with Kroger, whose shares tanked Thursday on
a profit warning, tumbling 9.2% and Supervalu falling 14.2%. Sprouts
Farmers Market, which gets roughly 60% of its sales selling fresh
produce, declined 6.3%. All of these stocks finished the day above their
Amazon’s move is a threat to supermarket chains like Kroger, fresh
produce retailers like Sprouts Farmers Market, big-box retailers like
Walmart and Target that have moved aggressively into groceries, and
companies like Costco that sell bulk products, including food, at
Companies in the food business, he adds, are also under attack from
another recent entry into the U.S. grocery pace, German grocer Lidl.
"Both global players maximize efficiencies ... which probably portends
price wars," McMillan said.
Shares of Amazon rallied 2.4%. Whole Foods Market, which has more than
420 stores in more than 40 states in the U.S., soared more than 29.1% to
$42.68 . Amazon is paying $42 per share for Whole Foods, which is a 27%
premium from Thursday’s night close.
Amazon, known for its low prices and selling virtually everything,
including groceries, will likely take market share from competitors and
hurt their profit margins if they have to lower prices to compete.
Amazon’s deal also gives it a brick-and-mortar footprint around the U.S.
Shares of iconic food-staple companies also took a hit. Kellogg (K),
whose brands include Special K cereal, Eggo waffles and Pop-Tarts, fell
1.7%, while General Mills (GIS), which sells Cheerios cereal and Yoplait
yogurt, slipped 3%.