Investors and Wall Street analysts have been paying close attention to the struggles of traditional brick-and-mortar names, particularly department stores.
Some recent data indicate rising credit defaults among traditional retailers, a theme that could weigh on standard exchange traded funds.
Fortunately, the ETF universe’s evolution reflects changing trends in retail, a theme embodied by 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.
In fact, IBUY’s gain of nearly 12% since coming to market puts it well ahead of the returns offered by the largest legacy retail ETF over the same period.
“While online sales are skyrocketing, traditional retail is hitting the bricks (literally). Over the holidays, online sales generated $91b, an increase of 11% from one year ago, with a staggering $1b in sales generated per day between Nov 1 and Dec 31. Meanwhile, mall sales declined 9.9% in November and December. Macy’s (NYSE:M) experienced a 2.7% dip in sales, Kohl’s (NYSE:KSS) saw a 2.1% drop in sales, and Sears (NASDAQ:SHLD) also had troubles with 12% decline in sales,” according to Seeking Alpha.
Last year, the internet retail sub-industry revealed the highest earnings growth at 143.1% for all 13 retail sub-industries, according to FactSet. In contrast, the department store sub-industry reported the largest year-over-year drop in earnings of all 13 retail sub-industries at -47.8%.
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).
IBUY could see some action this week as Amazon.com (NasdaqGS: AMZN) reports fourth-quarter/holiday shopping season earnings after the close of U.S. markets Thursday. Amazon, the largest U.S. e-commerce company, is also an IBUY holding.
“One of the biggest and most obvious macro trends for 2017 is the shift in shopper preference from brick-and-mortar to online retail,” notes Seeking Alpha. “U.S. online retail growth rate from 1999 to 2016 has been a staggering 20% per year! And E-commerce still represents only 8.4% of total retail sales.”
For more information on the retail sector, visit our retail category.