Why The Hain Celestial Group Inc. Lost 10% Last Month

9/13/17

By Jeremy Bowman, Motley Fool

What happened

Shares of The Hain Celestial Group Inc. (NASDAQ:HAIN) took a hit last month when Amazon.com (NASDAQ:AMZN) said it was about to close on Whole Foods Market, and would slash prices on a number of staples. Hain is a key supplier of Whole Foods, and investors seem to think the organic specialist could be a loser in the deal.

A collection of Hain Celestial products

IMAGE SOURCE: HAIN CELESTIAL.

Shares fell 10% for the month, according to data from S&P Global Market Intelligence. As the chart below shows, the stock dove on Aug. 24 as the Amazon news came out.

HAIN Chart

HAIN DATA BY YCHARTS.

So what

Amazon's announcement that it would cut prices at Whole Foods once it took over the organic grocer on Aug. 28 sent shares of supermarket chains plummeting and also hit food stocks like Hain and United Natural Foods (NASDAQ:UNFI), which is also a major Whole Foods supplier. Even mainstream food companies that don't supply Whole Foods slipped as the Amazon effect is expected to hasten a price war already going on in the industry.

The biggest losers from the Amazon-Whole Foods deal, however, may not be other supermarkets but food brands, like Hain's, that Amazon would like to downplay in favor of Whole Foods' private-label 365 brands, thereby eliminating the middleman.

Now what

Amazon isn't the only one promoting private brands as rivals including Kroger are also stepping up efforts to increase private-label sales. And some chains, like Trader Joe's, carry few branded goods, choosing to instead put their label on brand-name products, or just produce their own.

That combination of factors could spell trouble for Hain. Though the company is on the soundest footing it's had in a while after putting the accounting scandal behind it, the headwinds against the specialty-food supplier are only likely to pick up.

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