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Grocery store stocks take a beating on report that Amazon will launch its own chain of supermarkets

Key Points
  • Amazon is planning to launch a new grocery brand with a lower price point than Whole Foods, The Wall Street Journal reported Friday.
  • The company is planning to roll out dozens of the stores across the U.S., according to the Journal.
  • Grocery stocks including Walmart, Kroger and Costco all initially dipped on the news.
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Amazon to open dozens of grocery stores across the country

Amazon is planning to open its own grocery stores in the U.S. at a lower price point than Whole Foods, The Wall Street Journal reported Friday. The company is planning to open dozens of the stores, according to the Journal, with the first one opening in Los Angeles as early as the end of this year.

Walmart, Kroger, Target, BJs, Costco and Sprouts all dipped sharply on the news.

Amazon declined to comment on the report.

Amazon is reportedly getting ready to expand even further in early 2020 with two more leases already signed for other grocery locations. It's unclear whether the new stores will be branded as Amazon markets, though the Journal reported the chain will be separate from the Whole Foods brand. Amazon is reportedly in talks about opening grocery stores in shopping centers based in San Francisco, Seattle, Chicago, Washington, D.C., and Philadelphia.

The new stores would be smaller than the typical grocery store of about 60,000 square feet, according to the Journal, with Amazon seeking about 35,000 square feet of space.

Amazon is also interested in possible acquisitions to strengthen its supermarket strategy, according to the Journal. Regional grocery chains with around a dozen operating stores would be the ideal candidates for acquisition should Amazon choose to take that route, a source told the Journal.

Amazon initially made waves in the grocery industry when it announced in 2017 its plans to buy Whole Foods, a high-end retailer that prides itself on upscale produce. Now, it reportedly hopes to offer products at a more affordable price point with its new stores, which are not meant to compete with the Whole Foods brand directly.

The move marks another shift for Amazon from the digital to the physical world. The company has had retail locations previously through efforts such as its Amazon Go cashierless convenience stores.

Watch: Amazon may be looking to expand Whole Foods across the US

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Amazon may be looking to expand Whole Foods across the US