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Is February Retail Sales Spooking You? Play These 4 ETF Areas

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Simon Property's (SPG) Q1 performance reflects increased occupancy and leasing spread per square foot at the company's U.S. malls and Premium Outlets.
In this article:
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After rising 0.7% in January, U.S. retail sales dropped 0.2% in February. The reading lagged analysts’ expectations of a 0.3% increase. Reduced purchase of building materials, furniture, clothing, food, electronics and appliances as well as gardening equipment led to the sudden decline (read: January Retail Sales Strong Despite Shutdown: ETF & Stock Bets).

Sales at building material stores dropped 4.4%, the steepest since April 2012. Sales at food and beverage stores declined the maximum since February 2009 (down 1.2% versus a rise of 1.4%) and those at electronics and appliances stores posted the largest decline since May 2017 (down 1.3% versus a 0.6% uptick).

Waning benefits from $1.5 trillion in tax cuts and increased government spending seem to have weighed on retail sales in February. According to a CNBC article, the surprise decline in February sales can be blamed on delays in processing tax refunds in the middle of the month. Tax refunds have also been lower on average compared with the prior years due to the tax reform in January 2018. Inclement weather conditions are other reasons for the slack in sales.

Barring automobiles, gasoline, building materials and food services, retail sales dropped 0.2% in February, after an upwardly revised 1.7% increase in January. On a year-over-year basis, retail sales increased 2.2% in March compared with a 2.8% rise in the prior month.

Against this backdrop, we recommend a few ETFs and stocks from areas that defied the decline in February retail sales. Notably, seven out of the 13 major retail categories exhibited a rise in sales in February from the previous month, per tradingeconomics.

Online Stores

The appeal of online retailing has been high. Sales at online and mail-order retail trade increased 0.9% after 4.5% gain in January.

Amplify Online Retail ETF IBUY

The underlying EQM Online Retail Index utilizes a rules-based methodology to select a globally diverse group of companies with 70% or more of revenues from online and virtual sales (read: Consumer ETFs: Bull Market Winners With Room to Run in 2019).

Expedia Group Inc. EXPE

This Zacks Rank #2 online travel company allows business and leisure travelers through technology with the tools and information they need to efficiently research, plan, book and experience travel.

Health & Personal Care Stores

Sales at health & personal care grew 0.6%, after an expansion of 2.4%.

The Obesity ETF SLIM

The underlying Solactive Obesity Index tracks the performance of companies globally positioned to profit from servicing the obese, including biotechnology, pharmaceutical, healthcare & medical device company focusing on obesity-related diseases, and companies focused on weight loss programs, weight loss supplements or plus-sized apparel.

The Estee Lauder Companies Inc. EL

The Zacks Rank #1 (Strong Buy) company is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. It comes from a top-ranked Zacks industry (top 39%).

Broader Retail

Receipts at hobby, musical instrument and book stores jumped 0.5%, after a 5.2% rise in the prior month.

SPDR S&P Retail ETF XRT

The fund provides exposure to an array of retailing, ranging from apparel retailing (24.52%), Internet & Direct Marketing Retail (20.29%), Automotive Retail (15.78%), Specialty Stores (13.23%), Other (6.30%), Department Stores (5.61%) and etc.

Live Nation Entertainment Inc. LYV

This is the world's premier live entertainment company, consisting of Live Nation, Ticketmaster and Front Line Management Group. The stock holds a Zacks Rank #2 (Buy) and hails from a top-ranked Zacks industry (top 27%).

Motor Vehicle & Parts Dealers

Sales at motor vehicle & parts dealers inched up 0.7% versus a decline of 1.9%.

First Trust NASDAQ Global Auto Index Fund CARZ

The underlying NASDAQ OMX Global Auto Index of the fund is designed to track the performance of the largest and most liquid companies engaged in manufacturing automobiles.

AutoZone Inc. AZO

This Zacks Rank #2 company is a leading distributor of automotive replacement parts and accessories with stores in the United States, Puerto Rico, Mexico, and Brazil. It hails from a top-ranked Zacks industry (top 39%).

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Expedia Group, Inc. (EXPE) : Free Stock Analysis Report
 
AutoZone, Inc. (AZO) : Free Stock Analysis Report
 
The Estee Lauder Companies Inc. (EL) : Free Stock Analysis Report
 
Amplify Online Retail ETF (IBUY): ETF Research Reports
 
SPDR S&P Retail ETF (XRT): ETF Research Reports
 
First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports
 
Live Nation Entertainment, Inc. (LYV) : Free Stock Analysis Report
 
The Obesity ETF (SLIM): ETF Research Reports
 
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