On Friday, we learned that not even grocery giants are immune to a disruption from the technology sector.
On Friday, we learned that not even grocery giants are immune to a disruption from the technology sector. Prior to market open, it was announced that premium grocer Whole Foods Market, Inc. WFM would be acquired by online retail giant Amazon Inc. AMZN for roughly $14 billion. As a result of the unanticipated deal announcement, the already-struggling retail sector took a hit right out of the gate, with a handful of grocery competitors down double digits. Retailers such as Target Corporation TGT, Costco Wholesale Corporation COST, and The Kroger Co. KR saw shares slide with the looming fear that AMZN will continue to disrupt traditional brick-and-mortar stores and traditional ways of business. One name in particular that was hit hard was Kroger. KR, already down on less than favorable earnings from Thursday, slid over 12% on Friday. Over the past year, shares of KR have virtually been cut in half. Looking at the default chart below, KR broke a double bottom at $28 intraday on Thursday and with Friday’s action, fell further to $21, a low level not seen on the chart since March of 2014. This sell-off violated the bullish support line that had been in tact since May of 2011, flipping the overall trend negative and downticking KR to a weak 1 for 5'er. Additionally, weekly momentum just flipped negative, suggesting the potential for further price deterioration from here. At this juncture, we would avoid exposure to Kroger and the unfavored retail sector in general. Only time will tell what long-term affect this acquisition will have on the retail sector.
The performance numbers above a price return is not inclusive of dividends or all transaction costs. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.
