Traders betting against grocers have made a killing after Amazon's industry-rattling Whole Foods deal
Ever-expanding juggernaut Amazon's $13.7 billion acquisition of Whole Foods spurred share losses in the likes of Kroger, Target and Walmart, amounting to about $500 million of gains for short speculators last week alone, according to data compiled by financial analytics firm S3 Partners.
The short-seller profits reaped from the rubble of Kroger's stock price were particularly outsized compared to the size of the company's overall short interest.
The grocery chain has just $650 million held short, compared to roughly $2 billion for both Target and Walmart, S3 data show. Still, Kroger was the second-most-profitable bearish bet in the whole market as its stock price plunged 28%. Target and Walmart provided the fourth- and fifth-biggest short returns, respectively.
Now that organic grocer Whole Foods is under the Amazon umbrella, analysts are expecting the tech titan to further squeeze margins in an industry that already has razor-thin profitability thresholds.
While less diversified retailers like Kroger are seen taking the biggest hit, companies like Target - which gets roughly 20% of sales from grocery - are also seen coming under pressure in a retail environment that's already showing signs of decay.
That's not to say all short sellers had such a fruitful week. Those betting against acquisition target Whole Foods took it on the chin as the stock surged 19%, resulting in a nearly $200 million weekly loss.
