Amazon’s move into groceries could squeeze Costco

Costco’s business model of membership fees, low prices, and high degree of vertical integration will help it defend against the e-commerce giant that’s now buying Whole Foods, but the competitive pressure will increase.

Wall Street is feeling gloomy about Costco’s prospects following last Friday’s bombshell announcement that Amazon was buying Whole Foods, but can the warehouse giant’s $4.99 rotisserie chicken and $1.50 hot dog meal save it?

Costco’s shares have declined nearly 9 percent since news of Amazon’s deal broke. And at least two major Wall Street firms have downgraded Costco’s shares.

Deutsche Bank on Monday lowered its rating from “buy” to “hold,” saying “the pipeline of positive catalysts has played out and the competitive backdrop is intensifying” as both Amazon and Wal-Mart press their online and in-store efforts.

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