October Retail Sales Show Subdued Strength: ETFs In Focus

U.S. retail sales increased 0.3% sequentially in October, beating market expectations of a 0.2% rise. Sales recoiled from a 0.3% slump in September. Higher purchases of motor vehicles and lowered purchases of big-ticket household items and clothing, giving signs of a moderately strong holiday shopping season.

What Leads to the Worry?

Spending at furniture stores dropped at the quickest clip since December 2018 (down 0.9% vs 0.7%), and receipts at restaurants and bars dropped the most in nearly a year (down 0.3% vs 0.8%).

Declines were also palpable at electronics and appliance stores (down 0.4% versus 0.1% gain), building material stores (down 0.5% versus down 1.8%), clothing stores ( down 1.0% versus a gain of 0.3%), hobby, musical instrument and book stores (down 0.8% versus down 0.1%), and miscellaneous store retailers (down 0.6% versus down 0.2%).

Data for September was revised down to show the so-called core retail sales (excluding automobiles, gasoline, building materials and food services) declining 0.1% instead of being unchanged as previously reported.

What Were Saviors?

Sales at health and personal care stores were unchanged, after a 0.6% increase in September. Receipts at motor vehicle & parts dealers increased 0.5% in October (versus a decline of 1.3% in September) and those at gasoline stations jumped 1.1% (versus a decline of 0.1% in September). A rebound was noticed at sales at food & beverage stores (up 0.5% versus a decline of 0.6%) and general merchandise stores (up 0.4% versus down 0.4%), while online and mail-order retail sales increased at a faster pace (up 0.9% versus up 0.2%).

Against this backdrop, below we highlight a few ETFs that may benefit from the spending pattern in the month of October.

Health & Personal Care Stores– The Obesity ETF SLIM

The underlying Solactive Obesity Index tracks the performance of global companies focusing on obesity-related diseases, weight-loss programs, weight-loss supplements and plus-sized apparel.

Online Stores– Amplify Online Retail ETF IBUY

The underlying EQM Online Retail Index utilizes a rules-based methodology to select a globally diverse group of companies with 70% or more of online and virtual sales. The fund charges 65 bps in fees (read: Time to Flock to E-commerce ETFs Ahead of Holiday Season? ).

Auto – First Trust NASDAQ Global Auto Index Fund CARZ

The underlying NASDAQ OMX Global Auto Index is designed to track the performance of the largest and most-liquid companies engaged in manufacturing of automobiles. The fund charges 70 bps in fees.

Food & Beverage Stores – Consumer Staples Select Sector SPDR Fund XLP

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

The underlying Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. While Beverages take about 25.2% of the fund, Food & Staples Retailing accounts for about 20.3% of the portfolio and Food Products get about 17.23% of the chunk (read: Here's Why Consumer Staples ETFs Are Rising This Year ).

General Merchandise – VanEck Vectors Retail ETF (TSXV:RTH)

The underlying MVIS US Listed Retail 25 Index tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers.

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. Zacks Investment Research