Some traditional retailers, such as Target (NYSE: TGT), have recently delivered spectacular earnings reports, sending their shares soaring. However, other brick-and-mortar retailers are struggling as e-commerce and online purveyors capture more market share.
The ProShares Long Online/Short Stores ETF (CLIX) helps investors take advantage of both trends.
Proshares says about 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.Physical retailers are under immense pressure. Sales have been declining and profit margins are approaching lows not seen since the recession. Over 30 major retailers have declared bankruptcy in the past three years, and longstanding names like J.C. Penney and Macy’s are struggling to remain viable.CLIX combines a 100% long position in retailers that primarily sell online or through other non-store channels with a 50% short position in those that rely principally on physical stores. Investors have the opportunity to benefit from both outperforming online and underperforming physical retailers. The long/short structure also reduces equity market exposure and potentially results in less volatility than long-only equity strategies.”
Consider Holiday Shopping Season
With the holiday shopping season here and recent data confirming e-commerce is gaining an expanding slice of the U.S. retail pie, CLIX could be a valid near-term idea as well as a potent long-term trade.
“The Census Bureau of the Department of Commerce announced today that the estimate of U.S. retail e-commerce sales for the third quarter of 2019, adjusted for seasonal variation, but not for price changes, was $154.5 billion, an increase of 5.0 percent (±0.4%) from the second quarter of 2019,” said the Commerce Department in a note out Tuesday.
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment. Demographic trends are driving those shifts. Those trends bode well for CLIX.
CLIX is up more than 12% this year and has traded slightly higher over the past week.
For more market trends, visit ETF Trends.
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.