Underscoring the challenges faced by many traditional retailers, the most recent Barron’s cover story features this headline: “The Retail Reckoning Has Only Just Begun.” No, it’s not about slowing retail sales, because those data points remain firm.
Instead, the article highlights shoppers’ growing penchant for online venue, and how the growth of online retail and e-commerce could prompt even more store and mall closures over the coming years. Those themes could benefit the ProShares Decline of the Retail Store ETF (EMTY).
The Decline of the Retail Store ETF provides daily short exposure or -1x to the new Solactive-ProShares Bricks and Mortar Retail Store Index, which is comprised of traditional retailers and equally weights components. The fund holds companies including department stores, supermarkets and sellers of apparel, consumer electronics and home improvement items, such as retailers like Barnes & Noble, The Gap, Macy’s, Kroger and Best Buy, among others.
“U.S. retailers have already announced 7,567 store closings this year, or 4,512 after subtracting for openings, according to industry watcher Coresight Research. That compares with 2,606 net closings for all of last year,” reports Jack Hough for Barron’s.
Evaluating the Success of EMTY
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and effectively meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment.
This year, retailers have been announcing closures of physical stores at an elevated pace, but analysts expect that rate to increase over the next several years dramatically.
“An estimated 75,000 stores that sell clothing, electronics and furniture will close by 2026, when online shopping is expected to make up 25 percent of retail sales, according to UBS,” reports The Washington Post. For its part, EMTY is up more than 10% year-to-date, a strong showing when considering the fund has short positions, and the equity market has been mostly steady this year.
“The retail reckoning will hit department stores especially hard, according to UBS,” reports Barron’s. “Sales there have fallen 33% since their 2005 peak, but the store count increased 23% over the decade ended in 2016. Recent closures by Bon-Ton and Sears, along with Macy’s and J.C. Penney, haven’t yet brought supply in line with demand.”
For more thematic investing strategies, visit ETFdb.com.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.