Markets
WMT

Retail ETF Deals You Should Not Miss on Black Friday

A generic image of a person with a calculator and a paper with a chart on it.
Credit: Shutterstock photo

Black Friday - a shopping event that started only in the early 2000s - has secured its place in the schedule of busy Americans. The day after Thanksgiving may not be an official holiday, but its significance is no less thanks to the magic it casts on the economy.

Shoppers queue up in the cold for the best bargains that retailers can cough up for maximum profits. Most importantly, Black Friday kick starts the Christmas shopping season.

This year, Black Friday is all the more in the focus because retailers gave mixed cues on their financials in the third quarter earnings season. Notably, retailers generate 20-40% of their annual revenue in the holiday season. Naturally, Black Friday will give a clearer indication on what the financial status of retailers will be by the end of the holiday season.

Moderate Retail Earnings So Far

As of November 20, 2015, 37 of the 43 retailers in the S&P 500 index came up with Q3 results. Total earnings for these 37 retailers rose 4.3% year over year on 4.9% higher revenues. Within the bunch, 59.5% surpassed the earnings estimates while 40.5% beat top-line expectations, as per Zacks Earnings Trend . Both beat ratios are short of the index-average (read: Eyeing Q3 Revenue Growth Potential? Try These Sector ETFs ).

Consumer Sentiment in a Fix

It seems U.S. consumers are yet to be convinced about the steady home economy. If not, why are they holding themselves back from pouring their heart out on shopping? After all, they have saved a lot on gas stations courtesy of cheap fuel prices, but that hoard did not reach the cash counter of retailers.

Retail data also corroborates this fact. After a flat September, retail sales grew just 0.1% in October, falling short of the market expectation of 0.3% growth. To add to the woes, consumers' perception toward the U.S. economy suddenly soured in November as consumer confidence index slipped to 90.4 in the month from 99.1 in October. The figure is the lowest since September 2014 and also slackened for two successive months (read: Retail ETFs Slump: What's Up for the Holiday Season? ).

Black Friday Shopping Projection

Though the operating backdrop for retailers is not quite upbeat, industry experts see numerous solid reasons for consumers to knock on retailers' door, both brick-and-mortar stores as well as online, in the Thanksgiving weekend. After all, thrilling discounts are what cash-conscious American shoppers are looking now.

The National Retail Federation (NRF) estimates 135.8 million shoppers (58.7%) to shop on Thanksgiving, Black Friday, Small Business Saturday and or Sunday. This will be close to the 61.1% who planned to shop last year and more than 55% of holiday shoppers who made purchases either in stores or online over the same weekend in 2014.

Investors should note that in recent years, retailers are offering eye-catching deals throughout November and thus the year-end shopping euphoria hits the marketplace in advance. Still, the significance of Black Friday will never fade. NRF projects 73.5% shoppers this Black Friday against 68.2% in NRF's preliminary survey made for 2014. Also, Black Friday is projected to be the prime shopping day for the millennials.

Adobe 's model views that Black Friday 2015 is likely to witness a 15% year-over-year surge in sales to $2.7 billion. Forrester estimated , "40% of the growth in holiday sales overall will come from eCommerce this year." e-Marketer expects retail holiday sales to soar 5.7% in 2015, which is a four-year high while Deloitte predicts that holiday sales will rise 3.5%. So all in all, sales projections are not at all pessimistic before entering the all-important holiday season.

Promotional Offers

Below we highlight some juicy offers from big-box retailers for Black Friday and the Thanksgiving weekend.

Amazon ( AMZN ) should be a must-watch given the precedence of online sales. The company started off eight days ahead of the key event and is announcing deals as frequently as every five minutes.

Discount behemoth Target's ( TGT ) ' Black Friday ad ' is from Nov 26 to Nov 28. The retailer announced "no lines at target.com" this Black Friday with almost all its hot items accessible online.

Wal-Mart ( WMT ), begins in-store deals at 6 p.m. on Thanksgiving Day, while online offers kick starts even before. Best Buy ( BBY ) is also following suit and Macy's ( M ) online offers too start from Thanksgiving.

In short, since the bulk of Black Friday online shopping starts from Thanksgiving itself, Adobe estimates this Thanksgiving Day to see an 18% year-over-year rise in sales to $1.6 billion, which will be the 'fastest growing online sales day for the second consecutive year'.

ETFs to Play

Since this weekend is meant for retailers, a look at retail ETFs is worthwhile. While an individual stock pick is an option to play this deal mania, a basket approach can provide investors the same opportunity but with much lower risks. Below, we have highlighted three retail ETFs that investors should watch this weekend (read: The Complete Guide to Retail ETFs ).

SPDR S&P Retail ETF (XRT)

This $964-million ETF charges 35 bps in fees. The fund holds about 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.32% of the total assets. The fund has lost about 6.3% in the year-to-date timeframe. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Market Vectors Retail ETF (RTH)

This $146.1-million fund charges 35 bps in fees. The product is a large cap centric fund and is heavily concentrated on the top 10 holdings -- the largest allocations going to Amazon, Home Depot ( HD ) and Wal-Mart. RTH has gained 9.1% so far this year and has a Zacks ETF Rank of 1 with a Medium risk outlook.

PowerShares Retail Fund (PMR)

This fund has accumulated just $22.7 million in its asset base. The ETF charges 63 bps in fees per year. In total, the product holds 30 securities. PMR has lost about 3.4% this year and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

TARGET CORP (TGT): Free Stock Analysis Report

MACYS INC (M): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

BEST BUY (BBY): Free Stock Analysis Report

SPDR-SP RET ETF (XRT): ETF Research Reports

MKT VEC-RETAIL (RTH): ETF Research Reports

PWRSH-DYN RETL (PMR): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

WMT M BBY AMZN TGT

Other Topics

ETFs

Latest Markets Videos