June 17, 2017•Update: June 19, 2017
By Barry Eitel
SAN FRANCISCO
Shares of many grocers and retailers slumped Friday after Amazon announced a $14 billion deal to buy high-end grocery chain Whole Foods Market.
Costco, Dollar General, Kroger and Walmart all slid on Wall Street. The turbulence highlights the fear Amazon may disrupt the brick-and-mortar retail world in massive ways.
“For other grocers, the deal is potentially terrifying,” Neil Saunders, managing director of GlobalData Retail, wrote in a report released Friday. “Amazon has moved squarely onto the turf of traditional supermarkets and poses a much more significant threat.”
Amazon is already almost dominating retail – the company’s market share of the U.S. retail sector last year was estimated at 34 percent, while Walmart came second with 5 percent, according to Needham & Company's research in April.
Nearly $30 billion of market value disappeared Friday from grocery stocks. Many stocks, including Target and Smart & Final Stores, were plummeting more than 10 percent before evening out later in afternoon trading.
Walmart stocks dropped 4.6 percent to close at $75.27, while Target ultimately saw shares fall more than 5 percent, closing at $52.60. Closing at $22.29, Kroger stock plunged another 9 percent after it crashed 19 percent Thursday in its worst day since 1999.
The market reverberations of the announced deal traveled beyond the retail industry – shares of food companies like Hershey and Campbell Soup slid, too. Investors are likely worried that Amazon, once entrenched in the physical grocery store business, will ruthlessly cut prices for food products like it did with books.
Amazon stocks rose 2.4 percent to close at $987.71. Shares of Whole Foods shot up 29 percent and closed at $42.68 amid the news.
The merger of Whole Foods and Amazon is expected to close later in 2017 after gaining approval from U.S. regulators and Whole Foods' stockholders.
