There has not been much to get excited about when it comes to traditional retailers and the corresponding stocks this year. The SPDR S&P Retail ETF (XRT), the largest of the traditional retail exchange-traded funds (ETFs), is down a market-lagging 4 percent year to date, and that statistic barely scratches the surface of just how bad things are for some brick-and-mortar retailers.
In terms of the negative environment, the emphasis is on "brick-and-mortar," because the Amplify Online Retail ETF (IBUY) is a retail ETF standout. Just one day shy of its one-year anniversary, IBUY is up 10.6 percent year to date. Since coming to market in April 2016, IBUY is up nearly 19 percent, a staggering performance relative to the likes of XRT and traditional consumer discretionary ETFs. Many of the negative trends affecting traditional retailers, such as rampant store closings and job cuts, do not currently pertain to IBUY's holdings. (See also: A Look at Online Retail ETF IBUY.)
"Year-to-date store closings are already outpacing those of 2008, when the last U.S. recession was raging, according to Credit Suisse Group AG analyst Christian Buss. About 2,880 have been announced so far this year, compared with 1,153 for this period of 2016, he said in a report," according to a recent Bloomberg article. That same Bloomberg article notes that February and March represented the worst two-month stretch for retail layoffs since 2009. Meanwhile, IBUY constituents such as Amazon.com, Inc. (AMZN) are expanding and hiring scores of new workers. (See also: Evaluating Amazon's Job Creation Announcement.)
IBUY follows the EQM Online Retail Index, which holds companies that derive at least 70 percent of their sales online. The ETF is home to venerable online names such as eBay Inc. (EBAY) and Netflix, Inc. (NFLX) in addition to Amazon. "Online retail is the fastest growing segment of retail sales. Competitive pricing, shopping convenience, greater product selection and rapid delivery have made online retail a disruptive technology that is here to stay," said EQM Indexes.
Several retailers have filed for bankruptcy this year, while others, including some once venerable retail names, are shuttering stores at a feverish pace. Meanwhile, the growth opportunity for e-commerce, which potentially underscores IBUY's potency as a long-term holding, is undeniable. Online retail sales represented just 8.3 percent of all U.S. retail sales in the fourth quarter, indicating that there is plenty of room for growth. While 8.3 percent does not sound like much, that number has doubled in just eight years. (See also: Why Credit Suisse Thinks Amazon Will Fly Higher.)