As has been well documented in recent weeks, traditional retail stocks are languishing. Predictably, that trend is affecting the SPDR S&P Retail ETF (NYSEArca: XRT) and luring short sellers to the largest retail exchange traded fund.
XRT and traditional retail stocks are being hampered by a holiday shopping season that saw many consumers turn to online retail venues. Consumer spending has been muted this holiday season. According to First Data, retail spending is up 2%, or slightly slower than the 2.4% gain at this time last year, as online spending outpaces buying in physical stores from October 29 through December 12, reports Anne D’Innocenzio for the Associated Press. In contrast, online sales growth was up 9%.
Consumer discretionary stocks strengthened after the Christmas holiday weekend, with e-commerce-related exchange traded funds outpacing brick-and-mortar shops.
“December’s U.S. retail sales figures have reinforced that the secular shift from in-store to online spending shows no signs of slowing down. Department stores now account for just 2.67 percent of all retail sales, compared to 10.44 percent for non-store retailers,” reports Luke Kawa for Bloomberg.
To its credit, XRT is higher by more than 11% over the past year, but has slumped more than 6% over the past month. The retail ETF currently resides below its 20- and 50-day moving averages and barely above its 200-day line.
“As a testament to the gloomy outlook for brick-and-mortar retailers, short interest in the SPDR S&P Retail ETF (ticker: XRT) has soared to 273 percent of float, the highest among U.S. equity products at the end of 2016. On Jan. 4, Macy’s Inc. and Kohl’s Corp. pointed to weak holiday sales when slashing their full-year earnings forecasts during the after-hours session,” according to Bloomberg.
Other consumer discretionary and retail ETFs have been thriving, namely those with heavy tilts toward e-commerce names.
The trend away from traditional department stores and apparel retailers to online shopping destinations should benefit the Amplify Online Retail ETF (NasdaqGM: IBUY), which debuted last year. IBUY, which is comprised of global companies that generate at least 70% of revenue from online or virtual sales, has been one of the best-performing retail ETFs since its inception.
IBUY provides exposure to many familiar online names, such as WayFair Inc (NYSE: W), Etsy (NasdaqGS: ETSY), FTD Companies (NasdaqGS: FTD), Overstock Com Inc (NasdaqGS: OSTK) and Priceline (NasdaqGS: PCLN).
For more information on the consumer sector, visit our consumer discretionary category.