This Retail ETF Strategy Is Crushing it this Year | ETF Trends

In retail this year, two things are clear. First, e-commerce is growing by leaps and bounds will continue doing so. Second, many brick-and-mortar outfits are feeling the effects of the move to online retail. Many retail exchange traded funds only capitalize on the first of those two trends. The ProShares Long Online/Short Stores ETF (NYSEArca: CLIX) capitalizes on both.

CLIX tracks the ProShares Long Online/Short Stores Index, which combines two specialized retail indexes into one. It is 100% long the ProShares Online Retail Index, which includes retailers that primarily sell online or through other non-store channels, and 50% short the Solactive-ProShares Bricks and Mortar Retail Store Index that brings together traditional in-store retailers. So, the strategy benefits from the decreased foot traffic to traditional brick-and-mortar shops and from the increased reliance on online sales as more people shop at home.

Recent data confirm there’s something to the year-to-date gain of more than 87% for CLIX.

“Over a two-week span in early July, seven retailers, including The Paper Store, Brooks Brothers, and Lucky Brand, filed for bankruptcy protection,” reports Lauren Thomas for CNBC.

“J.Crew, Neiman Marcus and J.C. Penney and four other retailers had already filed in May. Lord & Taylor and the off-price shop Stein Mart led another wave that hit earlier this month. Some would say it has been a flood, but what’s coming could be a tsunami.”

Calling on CLIX

E-commerce sales are growing at a rapid pace and undermining in-store retail as consumer habits change and shoppers move online. As popular as they may seem now, online retailers like Amazon and Alibaba only account for about 10% of global retail sales, leaving tremendous room for growth.

A report out Tuesday from the Commerce Department said online retail sales surged 31.8% year-over-year in the second quarter and that e-commerce accounted for 13.1% of all U.S. retail sales during the April through June period.

“The Census Bureau of the Department of Commerce announced today that the estimate of U.S. retail e-commerce sales for the second quarter of 2020, adjusted for seasonal variation, but not for, was $211.5billion, an increase of 31.8percent(±1.2%) from the first quarter of 2020,” according to the report.

Rampant store closures add to the case for CLIX, which is higher by 18% over the past month.

“Thousands of brick-and-mortar stores are shutting permanently this year, with closures already topping 6,000, according to Coresight Research. Retailers currently holding going-out-of-business sales include J.C. Penney, Stein Mart, Ann Taylor owner Ascena and Pier 1,” according to CNBC.

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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.