This Retail ETF Could Strike a Pose if Amazon, J.C. Penney Strike a Deal

One of the more interesting rumors surfacing in the wake of the coronavirus is that Amazon could make a move on downtrodden brick-and-mortar retailer J.C. Penney. Should a deal materialize, it would be about J.C. Penney’s real estate holdings.

That could alter the landscape of retail property, potentially benefiting the Pacer Benchmark Retail Real Estate SCTR ETF (NYSEArca: RTL) in the process.

RTL tries to reflect the performance of the Benchmark Retail Real Estate SCTR Index, which is made up of shopping centers, shopping malls, and similar structures that are thriving enterprises filled with retail establishments and are located in prime locations with quality tenants throughout the country.

“In recent weeks, the e-commerce giant’s name has been floated alongside private equity shops and real estate investment trusts as a potential buyer for some or all of J. C. Penney Co. Inc., the department store that filed for bankruptcy in May amid the coronavirus-related economic shut down after more than a century in operation,” reports S&P Global Market Intelligence. “But if Amazon pursues a deal with J.C. Penney, it likely will target only select real estate assets and probably will not attempt to resurrect the J.C. Penney brand itself, experts said.”

RTL Relevancy

There has been plenty of talk about the rise of e-commerce and online retail companies with much of that coming at the expense of traditional brick-and-mortar retailers. The number of store closures across the U.S. is soaring this year, confirming e-commerce is disrupting physical retail stores.

To be precise, 7,600 stores closed earlier this year and by many accounts, that’s not nearly enough, indicating more closures could take place in 2020. Those closures could be hastened by a suddenly fragile economy and orders for people to stay inside due to the COVID-19 pandemic.

“What precisely Amazon would do with J.C. Penney storefronts, should a deal materialize, remains unclear,” notes S&P Global Market Intelligence. “Both companies declined to comment for this story. Experts say the space could help Amazon compete with Target Corp. and Walmart Inc., both of which have touted their brick-and-mortar footprints as distinct advantages in the e-commerce arms race. Amazon’s $17.19 billion of physical store sales in 2019, via mostly its 500-plus Whole Foods locations, is still a fraction of what the company makes online, according to S&P Global Market Intelligence data. Amazon’s online store sales totaled $141.25 billion in 2019.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.