Trouble in aisle 9: Traders look for opportunity in the grocers

The "Fast Money" traders debated whether there may be opportunities in the grocers after Sprouts Farmers Market issued disappointing guidance, dragging down other names in the space.

Sprouts said in a statement that industry-wide promotions have negatively affected retail deflation and traffic generation, amid a "prolonged deflationary environment" and "competitive landscape."

The stock fell more than 13 percent on Wednesday. Shares of Kroger and Whole Foods Market fell about 4 percent and 5 percent, respectively.

Sprouts said it now expects third-quarter sales growth to be roughly flat. Wall Street had previously expected Sprouts to grow sales by about 2.2 percent during the quarter, according to a FactSet consensus estimate.

Trader Brian Kelly said he isn't interested in the grocers and would rather own something like sugar. He pointed to the Barclays Bank iPath Bloomberg Sugar Subindex Total Return, which has surged more than 33 percent this year.

Even though the whole industry felt the pressure on Wednesday, trader Pete Najarian said that companies like Target, Wal-Mart and Kroger can better compete in the long run.

Trader Steve Grasso said that he is more interested in the producers like Tyson Foods than the grocers.

Trader Guy Adami said he actually likes Whole Foods because of the risk and reward. He said that while this is "a challenged story at best," the stock closed at $29.08 on Wednesday, about a dollar above its 52-week low of $28.07.


Disclosures:

PETE NAJARIAN

Long stock: AAPL, BAC, BMY, DIS, DISCA, GE, KMI, KMI.A, KO, LUX, PEP, PFE, TGT, VIAB and long calls: AAL, AMD, ABT, AKS, BAC, CIT, CNX, COP, CRM, CSCO, DAL, DISH, DVN, EGO, ETP, FB, FSLR, FXI, GLD, HALO, KGC, KO, LLY, M, MS, MT, MU, NEM, SBUX, SLV, TGT, TMUS, TWTR, TTS, UA, VRX, XLE Puts: CLF, MBLY, MRO, TSLA, EEM

STEVE GRASSO

Steve Grasso is long BA, CC, EVGN, KBH, MJNA, MON, MU, NKE, OLN, PFE, PHM, T, TWTR, GDX. Grasso's children own EFA, EFG, EWJ, IJR, SPY. No shorts. Stuart Frankel & Co Inc. and some of its Partners have a financial interest in LDP, WDR, AVP, CVX, FCX, ICE, KDUS, KO, MAT, MCD, MJNA, NE, NEM, OLN, OXY, RIG, STAG, TAXI, TEX, TITXF, URI, VALE, WDR, WYNN, ZNGA, CUBA, HSPO, ICE, AMZN, MJNA, TITXF, NXTD, SPY, QQQ, DIA, XLI, BGCP, VIRT, JCP, GE, AIR FP

BRIAN KELLY

Brian Kelly is long Bitcoin, CME, DXJ, GDX, KBE, SLV, TLT, VXX, XLF, XOP, US Dollar UUP; he is short the euro and Japanese yen.

GUY ADAMI

Guy Adami is long CELG, EXAS, GDX, INTC. Adami's wife, Linda Snow, works at Merck.