Investors Return Retail ETFs

ETF Trends

Plenty of U.S. retailers are blaming harsh winter weather for disappointing quarterly results, but investors are not taking the bait.

There have been some retail standouts, Nordstrom (JWN) and Tiffany (TIF) come to mind, but overall, the industry and corresponding exchange traded funds have not impressed this year. Heading into Thursday, the SPDR S&P Retail ETF (XRT) was down 6.2% year-to-date while the Market Vectors Retail ETF (RTH) was lower by 4.2%. [Blizzard Whacks Retail ETFs]

An array of mid- and small-cap retailers have recently been experiencing significant punishment and those sell-offs have prompted weakening technical.

“What I see, however, are breakdowns all over retail, starting with the monster selloffs in Staples (SPLS) and PetSmart (PETM). Both of those stocks got clobbered on disappointing earnings releases this week in typical bear-market fashion. Bull markets may forgive transgressions, but bear markets punish any problems, perceived or real,” writes Michael Kahn for Barron’s.

Just this week, shares of PetSmart have plunged 14% while Staples is down 10.3%. As Barron’s notes, Urban Outfitters (URBN) is trading near two-year lows while Dick’s Sporting Goods (DKS) is at 27-month low. Apparel and specialty retailers combine for 42.2% of XRT’s weight, perhaps explaining why investors have pulled almost $492 million from the ETF this year. [Retreating Retail ETFs]

XRT is far from the only offender among retail ETFs. RTH has been plagued by a combined 20% weight to Wal-Mart (WMT) and Amazon (AMZN).

Shares of Dow component Wal-Mart (WMT), the world’s largest retailer, are down 4.1% this, which looks good compared to the 23.4% lost by Amazon. That is enough to put the e-commerce giant in bear market territory. [Amazon a Problem for These ETFs]

Discretionary ETFs have also disappointed. For example, the Vanguard Consumer Discretionary ETF (VCR) is down 3.1% and has lost $163.6 million in assets this year. Only five of VCR’s top-10 holdings, a group that combines for over 35% of the ETF’s weight, are up year-to-date.

Vanguard Consumer Discretionary ETF

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Tom Lydon’s clients own shares of Amazon.

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