Grocers and retail stocks are getting killed on Amazon-Whole Foods deal

  • Following the announcement, Amazon's stock rose 3 percent as Whole Foods shares skyrocketed 28 percent.
  • Meanwhile, Kroger, Supervalu, Costco, Sprouts Farmers and other grocery stocks all tumbled.
  • Big-box retailers Target and Wal-Mart weren't immune from the Amazon effect Friday, either.

News that e-commerce giant is buying Whole Foods sent grocery stocks reeling Friday.

Amazon said it would buy the natural and organic foods supermarket chain for $42 per share in an all-cash deal valued at about $13.7 billion. The deal is expected to close in the second half of this year.

Following the announcement, Amazon's stock rose 3 percent as Whole Foods shares skyrocketed 28 percent.

Meanwhile, shares of large grocery chains dropped following the news, with traditional chains feared by Wall Street as being in trouble by Jeff Bezos' powerhouse play.

Kroger sank 14.5 percent, Supervalu plummeted 17 percent, Costco fell 7 percent, Sprouts Farmers skidded 12.7 percent, and United Natural Foods dropped more than 15 percent.

Big-box retailers weren't immune from the Amazon effect, either.

Discount retailers Target and Wal-Mart also fell after the deal's announcement. Target was down 10 percent, while Wal-Mart was down around 7 percent at one point.

European grocers, including Sainsbury and Tesco, also sank on the deal announcement. Amazon announcement came as unexpected by many who follow the companies.

"The consolidation of [Amazon and Whole Foods] is likely to accelerate the trend we have already seen among Millennial consumers who have rejected traditional Big Food brands in favor of more authentic, trendy offerings," Credit Suisse analyst Robert Moskow wrote in a note to clients.

"Amazon and Whole Foods are both quite good at creating brands of their own. As a result, the traditional brands may find themselves competing more directly with Whole Foods' on-trend organic and natural brands than ever before."

Needless to say, nobody is safe, including consumer packaged goods companies, Moskow went on.

Shares of Kellogg and General Mills, for example, were falling 2 percent and 3 percent, respectively, Friday.

In fact, one firm has created a "Death By Amazon Index," tracking traditional retail companies' performance compared to that of Amazon over the past five years.

The index, created by Bespoke Investment Group, contains the share prices of stocks such as Barnes & Noble, Macy's and Wal-Mart.

Death by Amazon Index

Source: Bespoke Investment Group

Essentially, lumped together, those retailers dealing in the same businesses where Amazon has a market share or is looking to grow one have not fared nearly as well over the years.

"If I was a shareholder of Target I would be terrified," Tom Forte, managing director of Maxim Group, told CNBC in an interview. "Grocery was just one category for [Amazon] to expand into." Apparel could come down the road, he agreed.

This is like Amazon stealing from the playbook of a Target or a Wal-Mart, Forte went on. "There's a value add in grocery," and Bezos realized that, he added.

Read more: Whole Foods stock rockets 28% on $13.7 billion Amazon takeover deal

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