Economy & Markets

Grocery stocks hammered after Amazon deal to buy Whole Foods

By David Hodges |
Source: The Canadian Press

Oil and gas stocks helped shore up the Toronto stock index on Friday, though shares in Canadian grocery retailers dropped sharply in the wake of Amazon's blockbuster deal to buy Whole Foods Market.

The S&P/TSX composite index was up 32.12 points to 15,192.54, despite losses of nearly 1.5% in the consumer staples sector. The energy sector led advancers on the TSX, up nearly 1%.

Experts say Amazon's US$13.7 billion acquisition of Whole Foods poses a threat to Canada's grocers and could shake up the supermarket industry.

"This is just a continuation of Amazon and some of the technology that they own that's going to continue to be disruptive," said Scott Vali, vice-president of equities at CIBC Asset Management.

"This gives them a foothold in the grocery business, which people thought would take them much longer to build out. ... They just continue to reach new parts of the economy and show the dominance of their distribution and supply chain."

At the close, shares of Loblaw tumbled $2.70 or 3.58% to $72.79, while Metro shed $1.29 or 2.9% to $43.16. Empire, the parent of Sobeys, gave back 70¢ or 3.6% to $18.74.

The base metals sector was another leading decliner on the TSX, as shares of Teck Resources extended its losses for a second day in a row — closing down $1.85 or 8.57% lower to $19.73.

Teck, the largest North American producer of steelmaking coal, said Thursday it expects to realize an average price for the commodity about 15% lower than the quarterly benchmark price.

"The guidance was below what most were anticipating," said Vali. "We're in a market where investors are relatively short-sighted and I'd say when there's disappointment they react quickly."

South of the border, the S&P 500 index eked out 0.69 of a point to 2,433.15 and the Nasdaq composite index was down 13.74 points to 6,151.76. The Dow Jones industrial average added 24.38 points to 21,384.28, a record high.

The Canadian dollar was up 0.29 of a cent to an average trading price of US75.57¢.

In commodities, the July crude contract advanced US29¢ at US$44.97 per barrel while the July natural gas contract was down US2¢ at US$3.04 per mmBTU.

The August gold contract was up US$1.90 to US$1,256.50 an ounce and the July copper contract was unchanged at US$2.56 a pound.