How Supermarket Stocks Performed in - Market Realist
The stocks of traditional grocery stores like Kroger were clobbered Friday after the deal was announced. So were Walmart and Target, which made big moves into groceries in recent years and now depend on food for a huge chunk of their sales.
The damage didn't stop there: Food companies themselves, like Hershey and Campbell Soup, also slumped because of investor concerns that Amazon will do for their products what it does for everything else -- cut prices ruthlessly. Amazon already had a relatively small grocery business of its own, Amazon Fresh, but its acquisition of Whole Foods is much more ominous sign for competitors.
Traditional grocers are already struggling with fierce competition and falling prices. Amazon's war chest and online strength, coupled with Whole Foods' brand power, could force grocers to cut costs and spend heavily on e-commerce.
Grocery stocks are getting clobbered after Amazon-Whole Foods deal - Jun. 16,
Target gets a third of its sales from those categories. Supermarket chains were already in trouble. Even before buying Whole Foods, Amazon had invested heavily in its food delivery business. Walmart has boosted its grocery business and private companies like Trader Joe's have also offered tough competition.
Food stocks also sank. Cereal stocks like Kellogg K , General Mills GIS and Post Holdings POST retreated as well. The concern is that Amazon's acquisition may force existing supermarkets to cut prices even on name brands, potentially squeezing the profit margins of these food companies. At the same time, Amazon has a private label food business that it can distribute at Whole Foods, while Whole Foods brands can be sold through Amazon's website.
Moreover, Amazon has just thrown its considerable weight behind a grocery chain in Whole Foods that doesn't sell many of those companies' name-brand products, like Frosted Flakes or Campbell Soup. Contrast the grocery carnage on Wall Street with the extreme optimism around Amazon. Start your day right with the latest news driving global markets, from major stock movers and key economic headlines to important events on the calendar.
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