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Retail ETFs in Focus on Early Holiday Sales Forecast
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While the retail sector has been struggling with a higher number of store closures or bankruptcy filing, early holiday sales forecasts point to healthier sales that would put a cap on the tumultuous year.
This is especially true as Deloitte projects holiday sales to rise as much as 4.5%, up from 3.6% seen last year while RetailNext and AlixPartners forecast 3.8% and 3.5-4.4% growth, respectively. E-commerce sales will likely grow 18-21% year over year, up from 14.3% last year per Deloitte while RetailNext expects a 14.9% jump (read: 4 ETFs & Stocks to Dodge Harvey's Ire and Retail Sales Slump).
An improving labor market, strong job additions, growing wages, rising consumer confidence and higher spending bode well for this holiday season. Notably, the implementation of Trump’s tax reform by the end of the year will bolster spending into the holidays. As a result, retailers are gearing up to attract customers through promotions, early-store openings, heavy discounts, as well as free shipping on online purchases. Additionally, many retailers like Target (TGT - Free Report) , Macy’s (M - Free Report) , Gap (GPS - Free Report) are on hiring spree in an effort to meet higher store traffic.
ETFs in Focus
Given this, we have highlighted retail ETFs for investors seeking to tap the early strong holiday sales.
This product tracks the S&P Retail Select Industry Index, holding 90 securities in its basket with each accounting for less than 1.4% of assets. Apparel retail takes the top spot at 23.2% share while Internet & direct marketing retail, automotive retail and specialty stores round off the next three spots with a double-digit allocation each. The fund has amassed $300.6 million in its asset base and charges 35 bps in annual fees. The fund has shed 6.3% so far this year and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: More Pain Ahead for Retail ETFs?).
This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top firm – Amazon (AMZN - Free Report) – at 20.4% while other firms hold no more than 5.3% share. The ETF has a certain tilt toward specialty retail, which accounts for 31% share while Internet & direct marketing (21%), hypermarkets (11%), drug stores (10%), and departmental stores (10%) round off the top five. The product has amassed $58.1 million in its asset base and charges 35 bps in annual fees. RTH has shed 6.4% in the same period. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
PowerShares Dynamic Retail Portfolio
This fund follows the Dynamic Retail Intellidex Index. In total, the product holds 29 securities with each holding less than 5.4% of assets. In terms of industrial exposure, specialty retail takes the top spot at 39%, while department stores (14%), hypermarkets (13%) and drug stores (13%) round off the top three positions. The fund has accumulated just $13.4 million in its asset base and charges 63 bps in fees per year. It has lost 6% this year and carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 48 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 8.3% of assets. While broadline retailers and specialty retailers make up for a bigger chunk at 25.1% and 18.2%, respectively, apparel retailers and drug retailers round off the next two spots with 17.1% and 12.4% share, respectively. FTXD has accumulated $1.9 million in its asset base and has an expense ratio of 0.60%. The ETF is down 1.8% this year (read: Solid Q2 Revenue Beat Fails to Boost Retail ETFs).
This ETF has attracted $101.5 million in its asset base. It offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 40 stocks that are widely diversified, with each holding no more than 5.3% of assets. The product charges 65 bps in fees per year and has gained 35.4% in the same time frame.
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Retail ETFs in Focus on Early Holiday Sales Forecast
While the retail sector has been struggling with a higher number of store closures or bankruptcy filing, early holiday sales forecasts point to healthier sales that would put a cap on the tumultuous year.
This is especially true as Deloitte projects holiday sales to rise as much as 4.5%, up from 3.6% seen last year while RetailNext and AlixPartners forecast 3.8% and 3.5-4.4% growth, respectively. E-commerce sales will likely grow 18-21% year over year, up from 14.3% last year per Deloitte while RetailNext expects a 14.9% jump (read: 4 ETFs & Stocks to Dodge Harvey's Ire and Retail Sales Slump).
An improving labor market, strong job additions, growing wages, rising consumer confidence and higher spending bode well for this holiday season. Notably, the implementation of Trump’s tax reform by the end of the year will bolster spending into the holidays. As a result, retailers are gearing up to attract customers through promotions, early-store openings, heavy discounts, as well as free shipping on online purchases. Additionally, many retailers like Target (TGT - Free Report) , Macy’s (M - Free Report) , Gap (GPS - Free Report) are on hiring spree in an effort to meet higher store traffic.
ETFs in Focus
Given this, we have highlighted retail ETFs for investors seeking to tap the early strong holiday sales.
SPDR S&P Retail ETF (XRT - Free Report)
This product tracks the S&P Retail Select Industry Index, holding 90 securities in its basket with each accounting for less than 1.4% of assets. Apparel retail takes the top spot at 23.2% share while Internet & direct marketing retail, automotive retail and specialty stores round off the next three spots with a double-digit allocation each. The fund has amassed $300.6 million in its asset base and charges 35 bps in annual fees. The fund has shed 6.3% so far this year and carries a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: More Pain Ahead for Retail ETFs?).
VanEck Vectors Retail ETF (RTH - Free Report)
This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top firm – Amazon (AMZN - Free Report) – at 20.4% while other firms hold no more than 5.3% share. The ETF has a certain tilt toward specialty retail, which accounts for 31% share while Internet & direct marketing (21%), hypermarkets (11%), drug stores (10%), and departmental stores (10%) round off the top five. The product has amassed $58.1 million in its asset base and charges 35 bps in annual fees. RTH has shed 6.4% in the same period. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
PowerShares Dynamic Retail Portfolio
This fund follows the Dynamic Retail Intellidex Index. In total, the product holds 29 securities with each holding less than 5.4% of assets. In terms of industrial exposure, specialty retail takes the top spot at 39%, while department stores (14%), hypermarkets (13%) and drug stores (13%) round off the top three positions. The fund has accumulated just $13.4 million in its asset base and charges 63 bps in fees per year. It has lost 6% this year and carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
First Trust Nasdaq Retail ETF
The fund follows the Nasdaq US Smart Retail Index and holds 48 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 8.3% of assets. While broadline retailers and specialty retailers make up for a bigger chunk at 25.1% and 18.2%, respectively, apparel retailers and drug retailers round off the next two spots with 17.1% and 12.4% share, respectively. FTXD has accumulated $1.9 million in its asset base and has an expense ratio of 0.60%. The ETF is down 1.8% this year (read: Solid Q2 Revenue Beat Fails to Boost Retail ETFs).
Amplify Online Retail ETF (IBUY - Free Report)
This ETF has attracted $101.5 million in its asset base. It offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 40 stocks that are widely diversified, with each holding no more than 5.3% of assets. The product charges 65 bps in fees per year and has gained 35.4% in the same time frame.
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 >>