Jim Chanos: 2 German companies should scare grocery stores more than Amazon

Key Points
  • Jim Chanos says he was short on the grocery industry even before Amazon's deal with Whole Foods.
  • He says two companies were already in the process of disrupting the industry before Jeff Bezos' Amazon showed up.
  • Aldi and Lidl should scare investors much more than Amazon, he says.

Famed short seller Jim Chanos said Tuesday he was short on the grocery industry even before Amazon's $13.7 billion deal for Whole Foods.

In an appearance on CNBC's "Halftime Report, " Chanos said two German companies were already in the process of disrupting the industry before Jeff Bezos' Amazon showed up: "Aldi and Lidl."

"(They) should scare investors much more than Amazon," the founder and managing partner of Kynikos Associates said on "Halftime Report " at the 2017 Delivering Alpha conference, presented by CNBC and Institutional Investor.

"They are just disrupting the model for the East Coast and South on," Chanos added.

The grocery wars in the U.S. have heated up.

Lidl, one of the world's largest retailers, in mid-June opened its first 10 U.S. grocery stores in Virginia and the Carolinas.

Aldi, which tracks closely with Lidl, has recently said it plans to invest about $5 billion globally in its growth over the next five years.

Chanos said the grocery industry is a business with "razor-thin margins" and declining returns on capital. Amazon's deal with Whole Foods didn't help that any, he said.

"For an industry with tiny, tiny margins and then having Amazon show up with Whole Foods just was sort of the last straw," he said.

— CNBC's Lauren Thomas contributed to this report.

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