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Retail sales in the United States gained 1.2% sequentially in July 2020, following an upwardly revised 8.4% growth in June. July sales however missed the market expectation of a 1.9% rise.
Consumer spending makes up about 70% of U.S. economic activity and thus gives a clear picture of economic growth. The latest retail sales data showed that resurgence in COVID-19 infections and a reduction in unemployment benefit checks put a brake on consumer demand, per tradingeconomics.
Below we highlight a few areas and the related ETFs that benefited despite the slightly-downbeat retail sales.
Electronics and Appliances
Sales of this category surged 22.9% sequentially. Year over year, sales were down 2.8%. In June 2020, sales gained 37.6% sequentially. Consumers’ interest in buying electronics products should keep demand for semiconductors higher and put VanEck Vectors Semiconductor ETF (SMH - Free Report) in a better position.
On the equity front, Zacks Rank #1 (Strong Buy) Aarons Inc. (AAN - Free Report) appears as a good bet. Through its various business segments, the company primarily deals in sales and lease ownership, apart from specialty retailing in furniture, home appliances, consumer electronics and accessories.
Restaurants
Sales in food services and drinking places saw a sequential increase of 5% in July but a year-year-year decline of 18.9%. In June, the segment had recorded a 26.7% sales surge. A few restaurant stocks have exposure to Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report) , so the fund stands to benefit.
As far as stocks are concerned, investors can bet on Zacks Rank #1 Papa Johns International Inc. (PZZA - Free Report) and Zacks Rank #2 Jack In The Box Inc. (JACK).
Miscellaneous Store Retailers
This segment saw a 6.2% sequential rise in sales. Moreover, the segment’s sales were 4.5% higher year over year. In the previous month, sales had surged 21.7%. Such trends bode well for all retail and consumer ETFs like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) and First Trust Nasdaq Retail ETF (FTXD).
In this regard, investors can place a bet on the nation's largest recreational boat and yacht retailer MarineMax Inc.HZO, which has a Zacks Rank #1.
Clothing
Many mall-based clothing stores were closed amid lockdowns. So, pent-up demand has been boosting spending in this segment. Apparel and accessories’ sales rose 5.7% sequentially in the month. However, sales were still 20.9% lower than in June 2019.
Investors should note that apparel sales had skyrocketed 98.8% in June 2020 too. Apparel retail takes about 14% of the fund SPDR S&P Retail ETF (XRT - Free Report) . Also, much of the focus of XRT shifted to online stores lately, ensuring its smooth ride ahead.
For single-stock selection, Zacks Rank #2 (Buy) Sportsmans Warehouse Holdings Inc. (SPWH - Free Report) appears as a nice bet.
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4 Sector ETFs & Stocks to Buy Despite Moderate Retail Sales
Retail sales in the United States gained 1.2% sequentially in July 2020, following an upwardly revised 8.4% growth in June. July sales however missed the market expectation of a 1.9% rise.
Consumer spending makes up about 70% of U.S. economic activity and thus gives a clear picture of economic growth. The latest retail sales data showed that resurgence in COVID-19 infections and a reduction in unemployment benefit checks put a brake on consumer demand, per tradingeconomics.
Below we highlight a few areas and the related ETFs that benefited despite the slightly-downbeat retail sales.
Electronics and Appliances
Sales of this category surged 22.9% sequentially. Year over year, sales were down 2.8%. In June 2020, sales gained 37.6% sequentially. Consumers’ interest in buying electronics products should keep demand for semiconductors higher and put VanEck Vectors Semiconductor ETF (SMH - Free Report) in a better position.
On the equity front, Zacks Rank #1 (Strong Buy) Aarons Inc. (AAN - Free Report) appears as a good bet. Through its various business segments, the company primarily deals in sales and lease ownership, apart from specialty retailing in furniture, home appliances, consumer electronics and accessories.
Restaurants
Sales in food services and drinking places saw a sequential increase of 5% in July but a year-year-year decline of 18.9%. In June, the segment had recorded a 26.7% sales surge. A few restaurant stocks have exposure to Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report) , so the fund stands to benefit.
As far as stocks are concerned, investors can bet on Zacks Rank #1 Papa Johns International Inc. (PZZA - Free Report) and Zacks Rank #2 Jack In The Box Inc. (JACK).
Miscellaneous Store Retailers
This segment saw a 6.2% sequential rise in sales. Moreover, the segment’s sales were 4.5% higher year over year. In the previous month, sales had surged 21.7%. Such trends bode well for all retail and consumer ETFs like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) , VanEck Vectors Retail ETF (RTH - Free Report) and First Trust Nasdaq Retail ETF (FTXD).
In this regard, investors can place a bet on the nation's largest recreational boat and yacht retailer MarineMax Inc. HZO, which has a Zacks Rank #1.
Clothing
Many mall-based clothing stores were closed amid lockdowns. So, pent-up demand has been boosting spending in this segment. Apparel and accessories’ sales rose 5.7% sequentially in the month. However, sales were still 20.9% lower than in June 2019.
Investors should note that apparel sales had skyrocketed 98.8% in June 2020 too. Apparel retail takes about 14% of the fund SPDR S&P Retail ETF (XRT - Free Report) . Also, much of the focus of XRT shifted to online stores lately, ensuring its smooth ride ahead.
For single-stock selection, Zacks Rank #2 (Buy) Sportsmans Warehouse Holdings Inc. (SPWH - Free Report) appears as a nice bet.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>