Retail ETF in Focus as Earnings Season Kicks Off
July 11th 2012 at 8:06am by Tom Lydon
Second quarter sales and earnings from retailers are indicating that consumers are spending again. Various U.S. retailers have kicked off earnings season on a positive note, gaining investor interest to the sector and exchange traded funds.
“Same-store sales at the more than 20 companies tracked by Retail Metrics Inc. rose 0.3 %, compared with the 1% average estimate of analysts surveyed by the research firm. The results follow a 7.2% increase last year,” Kelly Blessing for Bloomberg wrote.
TJX Cos (NYSE: TJX), which owns discount stores T.J. Maxx and Marshalls, beat analysts’ average estimate for a 3.7% sales increase. The healthy earnings for discount retailers signals that middle income consumers are spending again. Earnings season has kicked off on a mixed note, with overall sentiment more positive than expected. [S&P 500 ETFs Forming Bullish Pattern]
“The high-end consumer has fared particularly well throughout this recovery,” Ken Perkins, president of Retail Metrics, said in an interview. “On the low end, a lot of middle-income consumers have traded down.” [ETFs for Lower Oil Prices]
The retail sector is cyclical by nature. If the U.S. economy continues to make baby steps in an upward direction, the sector will benefit. The SPDR S&P Retail ETF (NYSEArca: XRT) has been on a steady uptrend since bottoming out in August 2011. XRT was down 0.13% so far this week, while the SPDR S&P 500 (NYSEArca: SPY) was down 0.16%. [Why Retail ETFs Need to Get Back on Track]
Parallel to U.S. retail sales, XRT has slid more than 4% in the past three months, as the weak jobs reports and constant Eurozone troubles influence spending. The S&P 500 shed about 3.3% over the past quarter. [ETF Chart of the Day: Retail]
XRT will be an important ETF to watch this week as U.S. retail sales and Conusmer Confidence are set to be announced on Wednesday and Friday.
SPDR S&P Retail ETF
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.