Aug 24, 2017

Amazon price cuts sink rivals' shares

Investors dumped food and grocery stocks on Thursday after Amazon said it would complete its takeover of Whole Foods on Monday and immediately embark on price cuts. In addition to lower prices, the e-commerce giant said it plans to sell Whole Foods brand products on its website, integrate its systems to offer Prime members discounts and provide Amazon pick-up spots at Whole Foods stores, among other changes. "Roger Davidson, a former Whole Foods executive now with consultancy firm Oakton Advisory Group, said Amazon"will lower prices on consequential items to drive traffic and sales, but not do a whole store price reduction, which could really damage gross margin and potentially wipe out operating margin. Prices at Whole Foods can be an average of 15% to 20% higher than those charged by some rivals. Amazon's move send Walmart down 2%, with Target slipping almost 4% and Costo down 5%. Food companies also took a hit: Campbell Soup fell 3% and Kellogg dropped 2.9%. Against that backdrop, shares of Signet Jewelers, which owns diamond brands such as Kay's, were a rare gem, rising more than 16%, after the firm announced a plan to buy an online retailer for $328m.

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