dglobalnews.com Grocery stocks sink on news that Amazon is buying Whole Foods
Published: Tue, June 20, 2017
Markets | By Armando Jensen

Grocery stocks sink on news that Amazon is buying Whole Foods

Grocery stocks sink on news that Amazon is buying Whole Foods

Whole Foods is courting the discount shopper with its lower cost brand 365. Kroger, the nation's biggest supermarket chain, had earlier warned Wall Street of disappointing earnings. The Journal estimated that the Amazon announcement had wiped almost $29 billion from the aggregate market cap of rivals in the grocery category. Walmart, which has the largest share of the USA food market, has been working on lowering prices, while Target has been struggling to turn around its grocery business. Target tumbled by 10 percent and Walmart was down by 6 percent. Many of them, including local Walmart locations in Springfield, offer curbside pickup, and other stores offer delivery services.

"Fresh foods are the final frontier for Amazon", Portalatin said.

Its AmazonFresh delivery service, which has been slow to take off, accounting for 0.8% of all grocery purchases past year.

"This will definitely make the market more competitive", she added.

Online delivery of groceries so far has been tough for any company to pull off because of customers' concerns about the quality of meat and produce, Wedbush Securities analyst Michael Pachter said. But she would never buy food online, she said.

Then there's Amazon, the online juggernaut that has turned its gaze to food retailing. Amazon shares climbed 2.4 percent to close at $987.71.

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Whole Foods Market started in 1978, and employees about 87000 people in its roughly 460 stores across the US, UK and Canada.

The deal comes a month after Whole Foods announced a board shake-up and cost-cutting plan amid falling sales and pressure from activist investor Jana Partners. It could have built up its groceries business without acquisitions, said Neil Saunders, managing director of GlobalData Retail, but that would have been costly and time-consuming. Blue Apron and many of these other meal-kit providers are well-resourced for storing and selling fresh food, and they are already in good metropolitan areas to begin with.

Barclay's analyst Karen Short today noted that another offer could be placed on the table for Whole Foods, prompting her to raise her stock price target for Whole Foods to $48 per share.

And Amazon could turn to dealmaking again. The online retail giant recently launched a new store called 'Amazon Go.' Located in Seattle, the store replaces cashiers with technology you would normally find in self-driving cars. Shoppers simply pick the items they want off the shelves and leave the store. "It's probably like the flawless match right", Whitney Winchester said. The deal on the surface seems valuable for stakeholders in both companies.

Courtney Hiddeman and her family live right down the street from the Whole Foods "world headquarters" on Bowie Street in Austin.

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