Amazon's deal to buy Whole Foods hits shares in US retailers

Amazon has also been expanding into brick-and-mortar stores with the launch of AmazonGo, a grocery store where customers don't have to wait in checkout lines.

I don't think anything changes with the 400-plus Whole Foods stores for now. It announced Friday that it's buying online men's clothing retailer Bonobos for $310 million, following a string of online acquisitions including ModCloth and Moosejaw.

Amazon.com (NASDAQ: AMZN) dropped a bomb on the grocery industry today.

MSCI's index of stock markets across the world rose 0.3 per cent, while European shares added 0.6 per cent, rebounding from recent losses. The purveyor of natural and organic foods suffered gave back $4.36, or 11 percent, to $35.39.

Groceries are already a fiercely competitive business, with low-priced rivals like Aldi putting pressure on traditional supermarket chains and another discounter, Lidl, opening its first US stores just this week.

This very big transaction is expected to close during the second half of the year.

Now Amazon will take on grocers like Wal-Mart and Kroger. "(Amazon founder CEO) Jeff Bezos is passionately driven by an insane focus on the customer and he makes his decisions based on data and implements them through superior technology, all of which will help Whole Foods appeal to a larger audience and strengthen the loyalty with its (current) audience", he said. Those stores join physical bookstores in Seattle.

Defense contractor Booz Allen Hamilton tumbled after it said the Department of Justice is investigating its accounting practices and the way it charges the USA government.

Some analysts on Wall Street see the acquisition as the online retailer's big entry into the food business.

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"The uncertainty over the impact of Amazon on the food industry is upsetting the market", said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Sarasota, Florida. Whole Foods will keep operating stores under its name. In an email to customers, the company said it planned to maintain the same standards under Amazon, including bans on artificial flavors and colors.

Amazon could cut costs if the technology gets good enough to deploy at Whole Foods locations.

Grocery sales are increasingly crucial to Amazon's ability to sustain its phenomenal growth rate simply because food represents a big portion of consumers on-going purchases.

Jana had called for Whole Foods to overhaul its operations and brought in retail and food experts to help foster a turnaround.

Amazon will also likely offer cheap grocery delivery options, she said, which would put pressure on grocers to follow suit.

Amazon's reach and its developing drone delivery projects means the deal has global implications for the retail sector.

"Instead of deliver to my home, why not just come down here?"

The deal has the possibility to be "transformative", Moody's lead retail analyst Charlie O'Shea said in a note, "not just for food retail, but for retail in general".

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