Retail Sales Worst in April: Least & Most Hurt Sector ETFs
Zacks Investment Research | May 18, 2020 02:30AM ET
U.S. retail sales declined 16.4% sequentially in April, missing market expectations of a 12% decline. The April figure marked the highest decline ever. This gives a clear sign of the severity of the coronavirus pandemic and the impact of lockdowns.
Consumer spending makes up about 70% of U.S. economic activity. Thus, any contraction in it will likely worsen the economic growth picture. Below we highlight a few areas and the related ETFs that were the most and least hurt.
Industries That Were the Least-Hurt
Online Stores
Non-store retail trade in April jumped 8.4% sequentially and 21.6% year over year. Non-requirement of physical presence amid growing fears of virus contamination has been aiding the space (read: Is Coronavirus a Boon for Online Retail ETFs? ).
ProShares Long Online/Short Stores ETF (CLIX )
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.
Groceries & Healthcare Essentials
Grocery and Health & personal care stores saw a smaller decline of 13.2% and 15.2% sequentially, respectively. Panic buying at the start of the lockdown boosted the sales in March and weighed on April buying.
Amid the ongoing virus scare, soap and clean materials companies like Procter & Gamble Company (NYSE:PG) , Clorox Company (NYSE:CLX) and Colgate-Palmolive Company (NYSE:CL) did well. Staples companies like Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:WMT) also stayed afloat as consumers’ need for daily essentials went in their favor.
Consumer Staples Select Sector SPDR ETF (NYSE:XLP) XLP is likely to remain steady amid the market turmoil for the same reason.
Major Losers
Clothing
Many mall-based clothing stores were closed amid lockdowns. Also, increased layoffs and cash crisis will likely weigh on the space in the coming days. Apparel sales fell 78.8% sequentially and 89.3% year over year. in April.
SPDR S&P Retail (NYSE:XRT) ETF XRT
The underlying S&P (NYSE:SPY) Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. Apparel Retail takes about 14% of the fund. The fund may face little pain ahead as much of the focus of XRT shifted toward online stores lately.
Furniture and Electronics
Furniture and electronics sales plunged 58.7% and 60.6% sequentially, respectively and 66.5% and 64.8% year over year in April. Home furnishing company Home Depot (NYSE:HD) have considerable exposure to Consumer Discretionary Select Sector SPDR Fund (RTH ).
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