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Grocery Stocks (KR, COST) Sink On Amazon-Whole Foods Approval

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Shares of several grocery store chains, including Kroger and Costco, tumbled on Thursday after Amazon’s purchase of Whole Foods became official.


The Federal Trade Commission finally approved the online retail behemoth’s purchase of the organic grocer, which was first announced in mid-June. The FTC determined Amazon’s acquisition passed U.S. antitrust laws, shortly after Whole Foods’ shareholders formally approved the $13.7 billion deal.

“Based on our investigation, we have decided not to pursue this matter further,” the Commission said in a statement late Wednesday. “Of course, the FTC always has the ability to investigate anticompetitive conduct should such action be warranted.”

Initial Plans

Aside from adding roughly 470 organic grocery stores in North America and the United Kingdom to its ever-growing list of diversified assets, Amazon wasted little time in making its initial Whole Foods plans known.

The Texas-based chain grew in popularity because of its wide selection of natural and organic offerings, but they often came with steep price tags. So naturally, one of Amazon’s first major steps, which will begin as soon as Monday, is to lower Whole Foods’ prices—and soon, it will make Amazon Prime the grocery store’s customer rewards program.

“Everybody should be able to eat Whole Foods Market quality – we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards,” CEO of Amazon Worldwide Consumer Jeff Wilke said in a statement.

Lost In The Super Market

Whole Foods is far from the biggest grocery store chain in the U.S., and its deal with Amazon will not change that—at least not in the foreseeable future. But the FTC approval sent investors fleeing from grocery store stocks as long-term disruption in the grocery sector seems possible, if not inevitable.

Shares of Costco (COST - Free Report) fell by over 5% on Thursday, while Target, TGT with its large grocery business, dipped by 3.99%. Kroger KR, which also owns multiple grocery subsidiaries, share prices tanked by 7.71% and nearly touched its 52-week low.

Less well-known chains such as Casey's General Stores CASY, Weis Markets (WMK), and Village Super Market VLGEA all saw their stock prices fall by over 1.60%. Shares of Ingles Markets IMKTA fell by 3.54%, while Smart & Final Stores SFS dipped by 2.76%.

Sprouts Farmers Market SFM saw its stock price crash 6.95% and shares of SUPERVALU Inc. SVU dropped by 6.60%.

Whole Foods WFM stock gained 0.72%, but Amazon’s AMZN stock price took a hit and closed down 0.58% on Thursday (also read: Here's The Reason For Amazon's Recent Stock Pullback).

Bottom Line

Grocery Store chains don’t likely need to fear for their short-term stability or even viability. But, if the industry does not begin to make changes to their business models going forward, Amazon’s Whole Foods and its new lower organic food prices could make life a lot harder—especially if investors continue to flee the allies.

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