Todays’ major surprise was the pre-market suspension of trading in Whole Foods (WFM) for news pending. The news was that Amazon (AMZN) is buying WFM for $42 a share in cash. The reaction in AMZN was a selloff to -20 or so before people started to figure out what the deal actually means, and rallied $50 to +30.
THIS IS A “GAME CHANGER” FOR THE GROCERY MARKET.
And it shows with an across the board to everyone, even the majors that have added food recently to their other offerings. These include WMT -4.50, TGT -6.15, KR -3.65, COST -13, SFM -3, and UNFI -9. These are major percentage moves to the downside. The real problem for these companies is the fact, as pointed out by Kroger after beating on both top and bottom lines but gave weaker guidance due to “increased price DEFLATION and the inability to raise prices.”
AMZN will now crush margins as they have in other industries. This is a brutal assault on this sector…
Tomorrow is another day...CAM
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