Wal-Mart’s Search for Growth Expands Consumer ETFs?

Exchange traded funds (ETFs) with Wal-Mart (WMT) as their top holding could see some major movement within the next few years. The world’s largest retailer, has announced plans to more than double its stores in China in the next five years in an effort to tap the growing personal wealth of the country’s more than 1 billion people, says Todd Sullivan for Straight Stocks. 

Already, Wal-Mart has 84 stores across 46 Chinese cities. The proposed expansion will allow Wal-Mart to go further into the country in smaller towns. Wal-Mart has already opened 12 stores in China to date this year and is well on track to beat its 2006 total of 15. Although many in the U.S. seem to be sick of Wal-Mart and have moved on to its largest competitor Target (TGT), Wal-Mart is generally welcomed with open arms abroad. Illustrating this point, is Wal-Mart’s increase in same store sales overseas at an almost 16% clip to date this year.

Wal-Mart is the largest holding in both iShares Dow Jones U.S. Consumer Services (IYC) and Retail HOLDRs (RTH). Wal-mart makes up 6.1% of IYC and 16.0% of RTH. Currently, IYC is up 3.2% year-to-date, and RTH is up 2.3% year-to-date.

Another factor that could impact RTH is that one of its top holdings, Target, has cut its September sales forecast. It anticipates a gain of only 1.5% to 2.5% versus 4% to 6%, reports James Covert for Dow Jones Newswires. One reason behind many retailers’ reduced sales expectations is the regional housing woes. Also, employment is the most important economic factor for consumer spending. Although recent government data about job growth has been positive, large states such as California and Florida appear to be areas of weakness for jobs and housing problems.