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After Bezos' 'big, bold, dangerous move,' Wal-Mart needs to watch their flank, says former Walmart US CEO

  • The former CEO of Wal-Mart, Bill Simon, called Jeff Bezos' bid to purchase Whole Foods "a big, bold, dangerous move."
  • Simon said that grocery is the most difficult segment of the retail space right now.
  • "But, if this is an indication of Amazon's commitment to get into grocery and get into fresh in a big way, then I think that will make everybody stand up and take notice," Simon said.

Amazon's bid to acquire Whole Foods Market is "typical Bezos," according to the former CEO of Walmart U.S.

"I think it really demonstrates his commitment to get into brick-and-mortar retail and to get into food, in particular, and that can't be good for anyone selling food right now," Bill Simon said on CNBC's "Closing Bell" Friday.

Early Friday the e-commerce giant said it planned to purchase the grocer for $42 a share, in a deal valued at $13.7 billion.

Simon, who served as the president and CEO of Walmart U.S. from 2010 until 2014, called Jeff Bezos' decision to purchase Whole Foods "a big, bold, dangerous move."

"It's not going to be easy," Simon said. "[Bezos] picked the segment of retail that might be the most difficult: grocery, fresh and premium."

Simon called Bezos' bid for Whole Foods "transformational" for the grocery segment and said that "Wal-Mart needs to watch their flank."

Wal-Mart shares fell 4.6 percent on Friday, amid a selloff of grocery store stocks. It was the second day of selling in the grocery sector. On Thursday, Kroger's earnings revealed just how competitive the grocery business has been, with food price deflation pressuring profit margins.

Not only are grocery chains competing with each other and contending with non-traditional grocers like Target and Wal-Mart, but they now face a digital threat. Mickey Chadha, a vice president at Moody's said that this move by Amazon will likely lead to consolidation in the supermarket space.

Bill Simon, fmr. president and CEO, Walmart U.S.
Adam Jeffery | CNBC
Bill Simon, fmr. president and CEO, Walmart U.S.

Simon doesn't expect that Wal-Mart's shares will remain down for long. The discount retailer has a strong base among low-to-middle income consumers and therefore does not compete as readily with Whole Foods as other, more premium, grocery chains, he said.

"But, if this is an indication of Amazon's commitment to get into grocery and get into fresh in a big way, then I think that will make everybody stand up and take notice," Simon said. "For the near-term and probably the medium-term, I think Wal-Mart will be just fine."

Whole Foods' stock rocketed up as much as 30 percent, last changing hands at $42.68, slightly above Amazon's intended purchase price.