3 ETF Areas to Win Despite Flat Retail Sales in April
Retail sales in April remained unchanged, contrasting with a 0.6% increase in March and defying the 0.4% rise anticipated by economists, as reported by Bloomberg, quoted on Yahoo Finance. This unexpected stagnation in consumer spending indicates a possible shift in consumer behavior amidst persistent inflation and higher interest rates.
When excluding auto and gas purchases, retail sales slightly fell by 0.1%, against predictions of a modest 0.1% growth. Nonstore retailers, primarily online shops, saw the most significant drop, with sales declining by 1.2% from the previous month. Similarly, sales in sporting goods and hobby stores fell by 0.9%.
Tim Quinlan, a senior economist at Wells Fargo, noted that certain one-off events likely influenced April's sales figures. Per Tim Quinlan, an early Easter and a special sales event by Amazon in March likely pulled forward some consumer demand, which exaggerated the decline in April. Quinlan further explained that the significant buying in March led to the noticeable drop in April for non-store retailers.
Below we highlight a few areas and the related ETFs & stocks that may benefit handsomely from the retail sales.
Winning Areas
Electronics & Appliance Stores
Sales gained 1.5% sequentially in April and 0.8% year over year. Rise in electronics sales should boost semiconductor funds and stocks.
VanEck Vectors 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 – As far as stocks are concerned, investors can take a look at BBY. It is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances and related services. The fund has a Zacks Rank #3.
Food & Beverage Stores
Sales gained 0.8% sequentially in April and 2.2% year over year.
Consumer Staples Select Sector SPDR ETF XLP – The underlying Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. The fund charges 9 bps in fees.
KimberlyClark KMB – Kimberly-Clark Corporation is principally engaged in the manufacture and marketing of a wide range of consumer products around the world. The company sells its products to supermarkets; mass merchandisers; drugstores; warehouse clubs; variety and department stores; retail outlets; manufacturing, lodging, office building, food service, and health care establishments; and high-volume public facilities. The fund has a Zacks Rank #3.
Clothing Stores
Sales gained 1.6% sequentially in April and 2.7% year over year.
SPDR S&P Retail ETF XRT – The fund gives exposure to US retail stocks. Apparel retail takes about 21% of the fund. The fund charges 35 bps in fees.
The Gap GPS – The Gap, Inc. is a premier international specialty retailer offering a diverse range of clothing, accessories, and personal care products. The fund has a Zacks Rank #1 (Strong Buy).
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Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
Kimberly-Clark Corporation (KMB) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports