What's Throwing Off Seasonal Retail ETFs? | ETF Trends

The El Nino weather phenomenon is throwing a wrench into the normal weather pattern to the dismay of retailers and sector-related exchange traded funds that depend on the seasonal sales boost.

While the East Coast is finally experiencing some winter cold, analysts argue that a spike in demand for cold-weather apparel is too little too late, reports Krystina Gustafson for CNBC.

Moreover, market watchers anticipate that spring will get off to an unusually cool start across the U.S., which could deal a greater blow to sales than a warm winter.

“Winter is coming,” Scott Bernhardt, president of Planalytics, a consulting firm that analyzes the effect of weather on consumer demand, told CNBC. “But it’s not going to be enough to make up for missing the holiday season.”

Specifically, Planalytics estimated that specialty apparel stores lost $421 million in sales due to warmer conditions between November 1 and December 19 and may have lost up to $500 million through December 26 – these estimates do not include department store sales.

Consequently, ETFs with a greater tilt toward smaller retailers have been under pressure for much of the year. For instance, the SPDR S&P Retail ETF (NYSEArca: XRT) declined 7.9% in 2015 while the PowerShares Dynamic Retail Portfolio (NYSEArca: PMR) dipped 3.5%. [Don’t be Fooled by the Season and Retail ETFs]

XRT underlying index follows a more equal-weight methodology, which includes a heavier 19.0% tilt toward micro-caps and 35.6% toward small-caps. The fund includes a 18.1% weight in specialty stores and 23.3% in apparel retail.

PMR, which follows a fundamental indexing methodology, also includes 17.9% micro-caps and 24.5% small-caps, but the fund holds a more defensive 37.6% tilt toward consumer staples.