The purchase by the online retail giant ramps up competitive pressure on the grocery industry
Supermarket 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.
In early trading following Amazon’s entry into the food-selling business, shares of Walmart tumbled more than 6%, making it the biggest loser in the blue-chip Dow Jones industrial average. Target shares plunged more than 10%. Costco shares were down more than 7%. Supermarket chains also took big hits, with Kroger down more than 13% and Supervalu down nearly 16%. Sprouts Farmers Market, which gets roughly 60% of its sales selling fresh produce, was off more than 11%.
The aggressive push by Amazon into the food and grocery business is a threat to supermarket chains like Kroger, and fresh produce retailers like Sprouts Farmers Market, and big-box retailers like Walmart and Target that have moved aggressively into selling groceries, as well as companies like Costco that sell bulk products, including food, at discounted prices.
Related:
Shares of the online retail giant rose 3%. Whole Foods Market, which has more than 420 stores in the U. S., soared more than 27% to $41.91 in early trading. Amazon is paying $42 per share for Whole Foods, which is a 27% premium from Thursday’s night close.
Amazon is known for its low prices. Its move into the grocery and food business 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.
