Amazon.com, Inc. (NASDAQ: AMZN)'s $13.7 billion
acquisition of Whole Foods Market, Inc. (NASDAQ: WFM) is certainly a game-changer in the food space, but does it
justify a large sell-off in many grocery chains and food retailers?
Shares of Kroger Co (NYSE: KR) were lower by more than
12 percent late Friday morning while shares of Target Corporation (NYSE: TGT) were lower by nearly 10 percent; Costco Wholesale Corporation (NASDAQ:
COST) and Wal-Mart Stores Inc (NYSE: WMT) were each lower by around 6 percent.
Wells Fargo: Warning Shot To The Food Group
If anything, Amazon's acquisition of Whole Foods would serve as a "warning
shot" to the food retail industry which is already struggling from a difficult backdrop, Wells Fargo's Zachary Fadem commented in a research report. As such, the analyst turned
"incrementally more cautious" on the brick-and-mortar supermarket industry.
Looking forward the grocery industry is expected to shift toward a combination of digital and local with scale becoming an
increasingly important competitive advantage. Yet at the same the considerable decline in many food names appears to be "overblown," the analyst added.
Investors should consider buying shares of food distribution companies who remain more insulated, Fadem suggested. Some of the
names include US Foods Holding Corp (NYSE: USFD),
SYSCO Corporation (NYSE: SYY), and Performance Food
Group Co (NYSE: PFGC).
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Chef's
Warehouse, Performance Food Group: 2 Food Names Analysts Find Appetizing
Kroger
Won't Have It Easy Over The Next Few Years, But Others May Struggle More
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