What's Making Retail ETFs Great Bets Now? Let's Explore
Considering the existing tailwinds, we highlight some retail ETFs that investors can consider to tap the holiday sales surge.
Consumers have been battling the rising inflation levels and Omicron variant concerns. They seem to be upbeat about accelerated coronavirus vaccine rollout and recovering U.S. economy from the pandemic-led slowdown. High levels of consumer spending and improving employment conditions have kept the retail sector buzzing with opportunities.
Let’s look at certain factors that make the retail space attractive for investment purposes.
The U.S. holiday season sales figures are impressive and strong. Going by a Mastercard SpendingPulse report, holiday retail sales in the United States after excluding automotive from Nov 1 through Dec 24 climbed 8.5% year over year. There was an 8.1% year-over-year rise in in-store sales. Moreover, online sales climbed 11% and contributed to approximately 20.9% of overall retail sales, up from about 20.6% in 2020 and 14.6% in 2019, on par with the digitization trend. The pandemic has been a blessing in disguise for the e-commerce industry to date as people continue to practice social distancing and shopping online for all essentials, especially food items.
According to Mastercard SpendingPulse, U.S. retail sales — excluding automotive — for the 75 days that run from Oct 11-Dec 24 were up 8.6% from a year earlier. The report also demonstrated a year-over-year increase in sales for several categories — 47.3% for apparel, 32% for jewelry and 16.2% for electronics. Department stores witnessed sales growth of 21.2%, per Mastercard SpendingPulse report.
Commenting on the data, Steve Sadove, senior advisor for Mastercard and former CEO and Chairman of Saks Incorporated, reportedly said that “Shoppers were eager to secure their gifts ahead of the retail rush, with conversations surrounding supply chain and labor supply issues sending consumers online and to stores in droves. Consumers splurged throughout the season, with apparel and department stores experiencing strong growth as shoppers sought to put their best dressed foot forward.”
Furthermore, U.S. consumer confidence has strengthened in December. The Conference Board's measure of consumer confidence index stands at 115.8 in December, comparing favorably with an upwardly revised reading of 111.9 in November. December’s reading surpassed the consensus estimate of the metric, coming in at 111, per a Bloomberg poll. The latest consumer sentiment readings for December also look encouraging as the metric rose despite rising Omicron variant cases. The University of Michigan’s final consumer sentiment rose to 70.6 during December, up from the preliminary estimate of 70.4 and 67.4 in November.
Retail ETFs to Consider
Considering the strong trends, investors may want to park their money in the following retail ETFs to tap the sales boom.
Amplify Online Retail ETF IBUY
Amplify Online Retail ETF attracted $648.2 million to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index.
Amplify Online Retail ETF is home to 79 stocks, accounting for less than 2.37% of its assets. IBUY charges 65 basis points (bps) in annual fees (read: ETFs to Benefit From a Record Surge in Online Prices).
ProShares Online Retail ETF ONLN
ProShares Online Retail ETF focuses on global retailers that derive significant revenues from online sales. ONLN tracks the ProShares Online Retail Index, holding 40 stocks in its basket.
ProShares Online Retail ETF has accumulated $628.8 million in its asset base and charges 58 bps in annual fees (read: Online/e-Commerce Inflation at Record High: ETFs to Win).
SPDR S&P Retail ETF XRT
With AUM of $785.4 million, SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index. XRT holds 109 securities in its basket, with each accounting for not more than 1.17% of assets. Internet & direct marketing retail, apparel retail, automotive retail and specialty stores are the top four sectors with a double-digit allocation each.
SPDR S&P Retail ETF charges 35 bps in annual fees (read: ETF Ways to Play Santa Rally's Best Start in 20 Years).
VanEck Retail ETF RTH
VanEck Retail ETF provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top three firms with a combined 39.7% share.
VanEck Retail ETF has amassed $232.5 million in its asset base and charges 35 bps in annual fees.
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SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
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