As has been widely documented this year, traditional brick-and-mortar retailers are in perilous positions as shoppers continue gravitating to online venues. The the SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail-related exchange traded fund, epitomizes this theme as XRT is down 5.2% year-to-date while the largest consumer discretionary ETF is higher by 6.6%.
Adding to the concern for an ETF such as XRT is the fact that the broader consumer discretionary sector, which includes retail, is in the middle of its seasonally strong period. In fact, there are another six or seven weeks remaining in the strongest period of the year for the discretionary sector, but XRT is languishing.
Some short sellers smell blood when it comes traditional retail stocks.
“Average short interest, or bets that shares will fall, for members of the S&P 1500 retailing group now stands at 13 percent of float, according to a report last week from Bespoke Investment Group. That’s the highest level since December 2008,” reports CNBC.
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%.
“In the first quarter of this year, nine retailers filed for Chapter 11 bankruptcy protection, matching the number of filings for all of 2016 and tracking for the highest annual figure since 2009,” according to CNBC. “Consumption itself has been sluggish. On Friday, the Commerce Department said U.S. retail sales fell 0.2 percent in March. The disappointing figure followed a downwardly revised 0.3 percent drop in February that marked the biggest decline in nearly a year.
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.
For more information on the consumer sector, visit our consumer discretionary category.