Amazon's new Whole Foods discounts wipe out nearly $12 billion in market value from grocery sellers

Key Points
  • Shares of Kroger, Wal-Mart, Target, Costco, Supervalu and Sprouts Farmers Markets collapsed Thursday after Amazon said Whole Foods will cut prices on many grocery products.
  • The decline in the six stocks erased nearly $12 billion in market value from the names in total.
  • Consumer staples was the worst performing sector in the S&P 500 on Thursday, on pace for its worst day of the year.
Amazon's new Whole Foods discounts wipe out nearly $12 billion in market value from grocery sellers

Stocks of major food retailers collapsed Thursday, erasing nearly $12 billion in market value, after Amazon said Whole Foods Market will cut prices on many of its best-selling grocery products in just four days.

That's when Jeff Bezos' company is set to close its $13.7 billion acquisition of the high-end food retailer, the largest in Amazon's history.

Shares of Kroger closed 8.1 percent lower, Wal-Mart lost 2 percent, Target fell 4 percent, Costco declined 5 percent, and Supervalu and Sprouts Farmers Markets each dropped more than 6.5 percent.

Their combined decline erased about $11.6 billion in market value in a single day, according to CNBC analysis of FactSet data at Thursday's close.

"To get started, we're going to lower prices beginning Monday on a selection of best-selling grocery staples, including Whole Trade organic bananas, responsibly-farmed salmon, organic large brown eggs, animal-welfare-rated 85% lean ground beef, and more," Jeff Wilke, CEO of Amazon Worldwide Consumer, said in a release. "And this is just the beginning — we will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we invent together."

Whole Foods has more than 450 locations and is known for selling higher-priced, often organic, produce, while retailers like Wal-Mart have emphasized lower prices and savings for customers.

For example, bananas can cost 99 cents a pound at Whole Foods versus 49 cents at Wal-Mart.

"Over the longer term, I do see Amazon is going to be more competitive in this world," Joe Feldman, analyst at Telsey Advisory, said Thursday on CNBC's "Power Lunch." He did note that Wal-Mart and Costco's share price decline Thursday was "a bit of an overreaction" because of the difference in customer demographic.

Amazon closed down modestly amid a broader market decline, but held gains of 27 percent for the year. Whole Foods ended up slightly.

Of the six stocks listed above, only Wal-Mart and Sprouts have gained this year, up 13 and 17 percent, respectively.

Consumer staples fell 1.3 percent, the group's worst day since Nov. 30 and the worst performer in the S&P 500. Kroger was one of the biggest decliners in the stock sector.

— CNBC's Lauren Thomas contributed to this report.