As online shopping begins to take greater market share away from brick-and-mortar stores, ProShares launched two ETFs to help traders capitalize on the suffering of traditional retailers.
On Thursday, ProShares rolled out the ProShares Decline of the Retail Store ETF (NYSEArca: EMTY) and ProShares Long Online/Short Stores ETF (NYSE Arca: CLIX), which both have a 0.65% expense ratio.
The Decline of the Retail Store ETF provides daily short exposure or -1x to the new Solactive-ProShares Bricks and Mortar Retail Store Index, which is comprised of traditional retailers and equally weights components. The fund holds companies that include department stores, supermarkets and sellers of apparel, consumer electronics and home improvement items, such as retailers like Barnes & Noble, The Gap, Macy’s, Kroger and Best Buy, among others.
“Investors are witnessing signs of trouble in the malls and falling stock prices in the markets,” Michael L. Sapir, co-founder and CEO of ProShare Advisors, LLC, the advisor to ProShares, said in a note. “For the first time, investors can turn these trends into a potential investment opportunity through an ETF.”
For example, the SPDR S&P Retail ETF (NYSEArca: XRT), the largest retail ETF, decreased 8.4% year-to-date and declined 10.1% over the past year.
Over 30 major retailers have declared bankruptcy over the past three years, with almost two-thirds of those in 2017. Some analysts predict that online sales growth will outpace bricks and mortar retailers 3 to 1 by 2020 and contribute to the pressure within the traditional retail space.
“Retail is being profoundly disrupted by shoppers moving online, oversaturated markets and changing consumer behaviors,” Sapir said. “While some retailers that rely on in-store sales may be able to adapt, we believe those will be a minority, and that the long-term trend is against these companies and in favor EMTY’s strategy.”
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Long Online/Short Stores ETF is a type of long-short strategy and the first ETF to track the potential growth of online companies while benefiting from the decline of bricks and mortar retailers. Specifically, CLIX reflects the new ProShares Long Online/Short Stores Index, which combines a 100% long portfolio of on-line and non-traditional retailers with a 50% short position in bricks and mortar retailers.
“With CLIX, investors not only receive the investment potential of online retailers like Amazon and Alibaba but also have the possibility of additional return from short exposure to traditional retailers,” Sapir added. “CLIX’s 50% net exposure to the equity markets may result in less volatility than typical long-only equity strategies.”
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