The Pain For Grocery Stocks May Have Just Begun Thanks To Amazon

Grocery stocks are getting destroyed on Thursday, led by Kroger Co (NYSE: KR)'s poor outlook and a downgrade of Sprouts Farmers Market Inc (NASDAQ: SFM) after a 30-percent gain in 2017.

Investors looking to take advantage of the weakness may want to reconsider as the biggest tailwind to the group hasn't even started yet. Specifically, Amazon.com, Inc. (NASDAQ: AMZN) is gearing up for a full-fledged entry the grocery space — a category which Nomura's Anthony DiClemente describes as being the "largest and most under-penetrated."

Amazon is still in the early stages of testing its grocery business, including AmazonFresh, a delivery service for Prime members. Amazon is also testing out Amazon Go, a checkout-free experience.

Consumers Love The Convenience Amazon Can Offer

The commercial real estate firm Jones Lang LaSalle said in a recent report that grocery stores need to offer, CNBC noted: 1) convenience, 2) competitive prices and 3) an overall favorable experience.

Unfortunately for traditional grocers who may succeed in offering some form of convenience, Amazon is the king of convenience through its reputation of online shopping, ease of use, and home delivery.

"Convenience trends are changing the way people shop for food," the report said. "Grocers are trying to keep up with shifting demand."

Stock Movements

• Amazon was last seen down 1.63 percent at $960.60.
• Kroger was down 18.23 percent at $24.76.
• Sprouts was down 8.99 percent at $22.51.
• Peer Whole Foods Market, Inc. (NASDAQ: WFM) was down 6.74 percent at 33.06.
• Peer Weis Markets, Inc. (NYSE: WMK) was down 3.46 percent at $50.78.
• Peer Ingles Markets, Incorporated (NASDAQ: IMKTA) was down 4.47 percent at $35.30.

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