BACKGROUND:
Online retailing has witnessed very rough weather on brick-and mortar retailing
M
,
KSS
, SIX:JCP,
JWN
and many more. Now, it seems that the same fame is awaiting the grocery space, when
AMZN
'offered' to purchase NASDAQ:WFM, then most grocery stocks dropped about 10%. Is this drop justified ?
Regardless of it is good or bad for Amazon, the grocery sector was punished by this news and I don’t think stocks like
WMT
,
KR
,
COST
,
TGT
and
L
deserved to plummet nearly 10% on the news inducted investor psychology. FACTS:
- This is just an offer, not a done deal.
- "AMZN"'s plans for WFM (about 450 stores in North America) are unknown (distribution, grocery or integration ?).
- AMZN had prime membership reached 80% in the high income , high education level categories.
- WFM customer demography against KR, WMT, TGT, COST and Loblaws are different. Income levels, education levels, the number of children.
- OPINION, NOT A FACT: It is safe to assume, "WFM is for rich people".
- AMZN buying WFM is enabler to compete head on with WMT, KR, Loblaws, COST, etc.
If AMZN buys WFM today, it might take it four to five years to take on grocery sector. So there is some life left in grocery sector, and there is an opportunity that can be considered.
GAME PLAN: ETF
First Trust NASDAQ Retail ETF (PACF:FTXD). This ETF tracks index of 50 U.S. retailers.
VanEck Vectors Retail ETF (PACF:RTH) index of the 25 U.S. listed companies.