Back to top

Image: Bigstock

Coronavirus Ruins March Retail Sales: Top & Flop ETF Areas

Read MoreHide Full Article

U.S. retail sales declined 8.7% sequentially in March, after a downwardly revised 0.4% drop in February. Sales also fell shy of market forecasts of an 8% slump. It marked the steepest decline on record. The slump points to the harder-than-anticipated economic impact of coronavirus. Year over year, retail sales fell 6.2%.

Consumer spending makes up about 70% of U.S. economic activity. Thus, any contraction in it will likely drag the economy into recession. March’s sales report should serve as a guide for consumers’ future behavior. Below we highlight a few areas and the related ETFs that won/lost in the light of March retail sales.

Industries That Won

Food and Beverages

Food companies have been a winner in the pandemic as these are among the few that are operating seamlessly and are practically in high-demand due to essentiality. Food and beverage stores witnessed a sequential sales jump of 25.6% (up 28% year over year) in March, with grocery sales gaining even more (up 26.9% sequentially and 29.3% year over year). So far this year, F&B segments recorded $206.98 billion in sales, up 12.2% year over year.

Staples companies like Zacks Rank #2 (Buy) Costco Wholesale Corporation COST and Zacks Rank #3 Walmart Inc. WMT are likely to stay afloat as their business model revolves around consumers’ need for daily essentials.

On the ETF front, Consumer Staples Select Sector SPDR ETF (XLP - Free Report) is likely to remain steady amid the market turmoil for the same reason (read: Any Bright Spot in Q1 Earnings? Sector ETFs & Stocks to Buy).

Health and Personal Care

Health & personal care stores saw a sales jump of 4.3% in March. In the first three months of the year, the segment recorded about $89.1 billion in sales, up 3.2% year over year (read: Retail Sales Scorecard 2019: ETF & Stock Winners).

Amid the ongoing virus scare, health and personal care companies like Zacks Rank #1 (Strong Buy) Clorox Company CLX and Zacks Rank #3 Colgate-Palmolive Company CL, Edgewell Personal Care Company EPC and Procter & Gamble Company PG should do well.

Drug stores like Zacks Rank #2 CVS Health Corporation CVS should also emerge as winners in the near term. Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS - Free Report) and First Trust Nasdaq Retail ETF (FTXD - Free Report) are two ETF ways to tap the sales trend.

Online Stores

Non-store retail trade in March rose 3.1% sequentially and 9.7% year over year. Social distancing amid growing fears of virus contamination has been aiding the space (read: Is Coronavirus a Boon for Online Retail ETFs?).

Zacks Rank #2 stocks like Wayfair W and eBay EBAY should rule ahead. ProShares Long Online/Short Stores ETF (CLIX - Free Report) is a good bet to cash in on the trend. The underlying index consists of long positions in online retailers, included in the ProShares Online Retail Index, and short positions in the bricks and mortar retailers included in the Solactive-ProShares Bricks and Mortar Retail Store Index.

Major Losers

Clothing

Clothing & accessories stores saw a huge 50.5% sequential slump in sales. The shutdown of the economy has led to a decline in footfall at malls. Also, cash-strapped consumers have cut back on discretionary purchases. 

Apparel Retail takes about one-fourth of the fund SPDR S&P Retail ETF (XRT - Free Report) . The fund may face more pain ahead. On the stock front, Zacks Rank #5 (Strong Sell) Nordstrom Inc. JWN should be avioded.

Restaurants

Sales at food and drinking places fell 26.5% sequentially in March and were down 23% year over year.

Leading fast-food chains like McDonald's Corporation MCD and Restaurant Brands International Inc. QSR, with a Zacks Rank #4 (Sell), are the casualties here.Invesco Dynamic Leisure And Entertainment ETF (PEJ - Free Report) that hosts several restaurant and entertainment companies may see rough times ahead.

Motor Vehicles

Motor vehicle & parts dealers witnessed a sales decline of 25.6% in March. Companies like AutoNation Inc. AN, the largest automotive retailer in the United States, should suffer owing to the trend. On the fund front, First Trust NASDAQ Global Auto ETF (CARZ - Free Report) may fall prey to this sales trend.

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 >>