The SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail-related exchange traded fund, is down 6% year-to-date and data suggest some bearish traders more declines are on the way for assorted retail stocks.
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. The broader consumer discretionary sector is sporting a double-digit year-to-date gain.
“Investor fear of retail has turned to despair, with bets against the sector reaching the highest level since the collapse of Lehman Brothers,” reports CNBC. “Short interest — a measure of how many shares are being sold short compared to the total ‘float,’ or shares outstanding — has reached a post-financial crisis peak of 15.6 percent, according to Bespoke Investment Group.”
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.
“The larger set of consumer discretionary stocks has a short interest level of 11.7 percent, the highest since March 2009, around the time of the crisis lows for the stock market,” according to CNBC. “Both figures are as of the end of August and were released Tuesday. Short-sellers borrow shares to sell for a period of time, hoping to pocket the difference when they buy them back.”