Consumer spending declined notably in May. Retail sales fell by 0.9%, exceeding the expected 0.6% drop projected by Dow Jones economists, as quoted on CNBC. This decline follows a modest 0.1% dip in April and came amid heightened uncertainty regarding economic conditions and trade tensions.
Weakness Across Core Categories
When excluding auto sales, retail figures still disappointed with a 0.3% decline, compared to the anticipated 0.1% increase. However, a more focused measure, which strips out volatile categories like autos, gas, and building materials, showed a 0.4% gain. This metric is closely watched by economists because it feeds into GDP calculations.
Tariff Anxiety and Selective Spending
Spending peaked in March as consumers rushed to make purchases ahead of anticipated tariff enactments from President Donald Trump’s April “liberation day” announcement. But by May, shoppers grew cautious, especially with big-ticket items.
Winning Areas
Below we highlight a few areas and the related ETFs & stocks that may benefit handsomely from the retail sales.
Online Sales
Nonstore retailers (e.g., online sales) saw a 0.9% sequential increase and 8.3% yearly gain.
ProShares Online Retail ETF ONLN –The ProShares Online Retail Index is a specialized retail index that tracks retailers principally selling online or through other non-store channels. The fund charges 58 bps in fees.
Amazon.com AMZN – Amazon.com is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. The fund has a Zacks Rank #3 (Hold).
Clothing Stores
Sales gained 0.8% sequentially in May and 3.7% year over year.
SPDR S&P Retail ETF XRT – The fund gives exposure to US retail stocks. Apparel retail takes about 21% of the fund. The fund charges 35 bps in fees.
Urban Outfitters URBN – The Zacks Rank #1 company is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gifts products.
Miscellaneous Store Retailers
Sales for Miscellaneous Store Retailers rose 2.9% sequentially and 7.5% year over year.
VanEck Retail ETF RTH – The underlying MVIS US Listed Retail 25 Index tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. The fund charges 35 bps in fees.
Five Below FIVE – The Zacks Rank #2 company is a specialty value chain retailer that provides a wide range of premium quality and trendy merchandise for $5 or below. The company mainly targets teenagers or pre-teen shoppers for its products which include certain brands and licensed merchandise.
Furniture & Home Furnishing Stores
Sales for Furniture & Home Furnishing Stores increased 1.2% sequentially and 8.8% year over year.
iShares U.S. Consumer Focused ETF IEDI – The fund gives exposure to U.S. companies with a focus on U.S. consumer spending and consumer goods. The fund charges 18 bps in fees.
Home Depot HD – The Zacks Rank #3 company is the world’s largest home improvement specialty retailer.
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Amazon.com, Inc. (AMZN): Free Stock Analysis Report The Home Depot, Inc. (HD): Free Stock Analysis Report Urban Outfitters, Inc. (URBN): Free Stock Analysis Report Five Below, Inc. (FIVE): Free Stock Analysis Report SPDR S&P Retail ETF (XRT): ETF Research Reports VanEck Retail ETF (RTH): ETF Research Reports iShares U.S. Consumer Focused ETF (IEDI): ETF Research Reports ProShares Online Retail ETF (ONLN): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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