3 ETF Areas & Stocks to Win Despite Soft Retail Sales in May
Retail sales was weaker than expected in May. Sales rose just 0.1% sequentially, one-tenth of a percentage point below the Dow Jones estimate. However, the result was slightly better than the downwardly revised 0.2% decline in April.
This unexpected stagnation in consumer spending indicates a possible shift in consumer behavior amidst persistent inflation and higher interest rates. On a year-over-year basis, sales rose 2.3%. The sales number was worse when excluding autos, with a fall of 0.1% against the estimate for a 0.2% uptick.
Below we highlight a few areas and the related ETFs & stocks that may benefit handsomely despite the soft retail sales.
Winning Areas
Non-Store Retailers
Sales at non-store retailers rose 6.8% year over year in May 2024. On a sequential basis, sales gained 0.8% in May.
Amplify Online Retail ETF IBUY – The underlying index of the fund utilizes a rule-based methodology to select a globally diversified group of companies with 70% or more sales coming online and virtually. The fund charges 65 bps in fees.
Carvana CVNA – Carvana Co. is a leading e-commerce platform for buying and selling used cars. The stock has a Zacks Rank #1 (Strong Buy).
Miscellaneous Store Retailers
Sales rose 7.3% year over year in May 2024. On a sequential basis, sales gained 0.4% in May. Investors should also note that salesfor clothing & clothing accessories increased 2.4% year over year in May 2024. On a sequential basis, sales gained 0.9% in May.
SPDR S&P Retail ETF XRT – The underlying S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is a modified equal weight index. The fund charges 35 bps in fees. The fund XRT has about one-fifth weight in the apparel segment.
Walmart WMT – Walmart Inc. has evolved from just being a traditional brick-and-mortar retailer into an omnichannel player. The stock has a Zacks Rank #2 (Buy).
Electronics & Appliance Stores
Sales rose 1.8% year over year in May. On a sequential basis, sales inched up 0.4% in May.
VanEck Semiconductor ETF SMH – The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund charges 35 bps in fees.
Best Buy BBY – Best Buy Company is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services. The stock has a Zacks Rank #3 (Hold).
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Walmart Inc. (WMT) : Free Stock Analysis Report
Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
Carvana Co. (CVNA) : Free Stock Analysis Report
