Retail ETFs May Not Enjoy a Jolly Holiday Season


Retail ETF investors should enjoy the Donald Trump election win rally while they can as some brick-and-mortar stores are expecting lower fourth-quarter holiday sales.

The SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail-related ETF on the market, gained 4.5% over the past week and 7.1% over the last month. However, the retail sector is up against some major hurdles this season and may under perform the broader markets ahead.

Weak four-quarter forecasts from Abercrombie & Fitch (NYSE: ANF) and Gap Inc (NYSE: GPS) raised concerns that apparel retailers are at risk for another tough holiday season as fewer consumers visit malls and dial back spending on clothes, reports Gayathree Ganesan for Reuters.

Abercrombie sales have declined for 15 consecutive quarters while those of Gap have decreased for seven quarters.

The holiday season is also expected to be challenging for all retailers including department store operators like Macy’s (NYSE: M) and Kohl’s Corp (NYSE: KSS).

Weighing on the retail sector’s outlook, the unseasonably warm winter has diminished demand for winter clothing.

“It is tough overall, and it is tougher for teen,” Wolfe Research analyst Adrienne Yih told Reuters. “It has been unusually warm so far, and everybody is selling jackets and cold weather gear and it will be difficult to sell them when it is 65 degrees.”