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5 Industry ETFs Set to Beat Slowing Retail Sales

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Retail sales in the United States increased 0.6% sequentially in August 2020, following a downwardly revised 0.9% rise in July and compared to the forecast of a 1% uptick as unemployment benefits were reduced and support for small businesses ended.

Core retail sales, which exclude automobiles, gasoline, building materials and food services, dropped 0.1% last month after a downwardly revised 0.9% increase in July. Economists polled by Reuters had forecast core retail sales gaining 0.5% in August, as quoted on CNBC.

In short, U.S. retail sales grew in August for three successive months, but the momentum is slowing. Consumer spending makes up about 70% of U.S. economic activity. Thus, any jump or slowdown in it will make or break the economic growth picture. Against this wavering backdrop, below we highlight a few areas and the related ETFs that stayed afloat.

Restaurants

Sales in food services and drinking places saw an increase of 4.7% in August but were still 15.4% down year over year. 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 (Strong Buy) Brinker International Inc. (EAT - Free Report) and Zacks Rank #2 (Buy) Darden Restaurants Inc. (DRI).

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 gained 2.9% in the month, after recording solid gains in previous months. However, sales were still 20.4% lower than August 2019.

Apparel Retail takes about 14% of the fund SPDR S&P Retail ETF (XRT - Free Report) . Also, much of the focus of XRT shifted toward online stores lately, ensuring its smooth ride ahead.

For single-stock selection, Zacks Rank #1 Sportsmans Warehouse Holdings Inc. (SPWH - Free Report) and Zumiez Inc. (ZUMZ) appear as nice bets.

Furniture and Home Furnishing Stores

Furniture sales increased 2.1% sequentially. Year over year, sales were also up 3.8%. Home furnishing company Home Depot (HD - Free Report)  has considerable exposure to Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) and VanEck Vectors Retail ETF (RTH). So, these ETFs should win following the release of retail sales. Investors can also bet on Zacks Rank #1 stocks like RH (RH) and WilliamsSonoma Inc. (WSM).

Electronics and Appliances

Sales of this category nudged up 0.8% sequentially. Year over year, sales were down only 2.4%. 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 Best Buy Company Inc. (BBY - Free Report) appears a good bet. Best Buy is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, heath, security, appliances and related services.

Health & Personal Care Stores

This segment saw an uptick in sales by 0.8%. Moreover, the segment’s sales were 5.6% higher year over year. Such trends should bode well for all retail and consumer staples ETFs like Consumer Staples Select Sector SPDR Fund (XLP - Free Report) . In this regard, investors can place a bet on ColgatePalmolive Company (CL - Free Report) , which has a Zacks Rank #3 (Hold).

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