Retail Sales Returning to Pre-COVID 19 Level: Best ETF Areas
Retail sales in the United States jumped 7.5% sequentially in June 2020, following an upwardly revised record 18.2% rise in May. The reading surpassed market forecasts of a 5% gain as the coronavirus-led lockdown eased further.
Consumer spending makes up about 70% of U.S. economic activity. Thus, any massive jump in it will likely brighten the economic growth picture. Below we highlight a few areas and the related ETFs that benefited the most. Notably, the winning areas matched with that of May.
Many mall-based clothing stores were closed amid lockdowns. So, pent-up demand boosted spending in this segment. Apparel and accessories’ sales skyrocketed 105.1% sequentially in the month. However, sales were still 23.2% lower than Jun 2019.
Investors should note that apparel sales had skyrocketed 176.7% in May 2020 too. Apparel Retail takes about 14% of the fund SPDR S&P Retail ETF (XRT. Also, much of the focus of XRT shifted toward online stores lately, ensuring its smooth ride ahead.
For single-stock selection, Zacks Rank #2 (Buy) Shoe Carnival (SCVL) and Xcel Brands Inc (XELB) appear nice bets.
Electronics and Appliances
Sales of this category surged 37.4% sequentially. Year over year, sales were down 12.7%. In May 2020, sales gained 36.5% sequentially. Consumers’ interest in buying electronics products should keep demand for semiconductors higher and put VanEck Vectors Semiconductor ETF (SMH) in a better position.
On the equity front, Zacks Rank #2 Vivint Smart Home Inc. (VVNT) appears a good bet. The company is a smart-home company functioning primarily in North America.
Furniture and Electronics
Furniture sales jumped 32.5% sequentially. Year over year, sales were down only 3.5%. In May 2020, sales spiked 79.1% sequentially. Home furnishing company Home Depot (HD) has considerable exposure to Consumer Discretionary Select Sector SPDR Fund (XLY and VanEck Vectors Retail ETF (RTH). So, these ETFs should win following the release of retail sales.
Investors can also bet on Zacks Rank #1 (Strong Buy) stocks like RH (RH) and Haverty Furniture Companies Inc. (HVT).
Sporting Goods, Hobby, Musical Instrument & Book Stores
This segment saw a surge in sales by 26.5%. Moreover, the segment’s sales were 20.6% higher year over year. In the previous month, sales had surged 78%. Such trends should bode well for all retail and consumer discretionary ETFs like XRT, XLY and RTH. In this regard, investors can place a bet on the nation's largest recreational boat and yacht retailer MarineMax Inc. (HZO), which has a Zacks Rank #1.
Sales in food services and drinking places saw an increase of 20% in June, though sales were 26.3% down year over year. In May, the segment recorded a 31.5% sales surge. A few restaurant stocks have exposure to Invesco Dynamic Leisure and Entertainment ETF PEJ, so the fund stands to benefit.
As far as stocks are concerned, investors can bet on Zacks Rank #1 Papa Johns International Inc. (PZZA) and Zacks Rank #2 Chipotle Mexican Grill Inc. (CMG).
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Papa Johns International, Inc. (PZZA): Free Stock Analysis Report
SPDR SP Retail ETF (XRT): ETF Research Reports
VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
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