Retail ETFs May Rebound, But Play the Segment Carefully

Retail stocks are struggling this year and those struggles are reflected by the SPDR S&P Retail ETF (NYSEArca: XRT). XRT, the largest dedicated retail exchange traded fund, has had its share of struggles. However, some analysts think the broader retail space is poised to rebound, but investors should be wary of department store names.

Amazon (NasdaqGS: AMZN) and Dow component Wal-Mart (NYSE: WMT) have recently helped XRT’s rival, the VanEck Vectors Retail ETF (NYSEArca: RTH), perform less poorly than XRT. XRT, an equal-weight ETF, has been plagued by slumping apparel retailers, among other corners of the flailing retail industry.

SEE MORE: America’s Less Dressed: 3 Factors Weighing On Retail ETFs

There are fundamental factors that should buoy consumer discretionary and retail ETFs. For example, the U.S. has been adding about 200,000 new jobs each month for the past two years, a rapid pace not seen since the boom days of late 1990s. That thesis will be tested today with the delivery of the July jobs report.

“Retail brands could suffer if their offerings are largely contingent on department stores, the analysts said. Department stores want to have “clean” inventories, or have an appropriate amount for sales, so vendors should look to other distribution channels for stability, they said,” reports CNBC.


RTH covers the 25 largest U.S. companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. The ETF’s exposure to traditional department stores is light.