Retail ETFs: Watch for the Return of the Mallrat

Includes: PSCD, XRT
by: Tom Lydon

Retailers have long recognized the power of the adolescent and teen shopper. The economic downturn took away some of that power, but trendy teenagers could once again be putting gas in the engines of retail ETFs.

Dave Kansas for The Wall Street Journal reports that the retail sales report noted improved sales for luxury retailers like Nordstrom (NYSE: JWM) and Saks (NYSE: SKS) and stronger sales for teen retailers like Hot Topic (NASDAQ: HOTT) and Zumiez (NASDAQ: ZUMZ). The latter is a signal that ETF investors may want to think about the mallrat set when choosing retail ETFs.

  • PowerShares S&P SmallCap Consumer Discretionary (NYSEArca: XLYS) owns companies such as Iconix (NASDAQ: ICON), Steven Madden (NASDAQ: SHOO), Zumiez and Skechers (NYSE: SKX), among others.
  • SPDR S&P Retail (NYSEArca: XRT) has exposure to Urban Outfitters (NASDAQ: URBN), Aeropostale (NYSE: ARO), the Gap (NYSE: GPS) and Abercombie & Fitch (NYSE: ANF).

According to Retailer Customer Experience, some of the largest U.S. chains are in expansion mode. According to the report, some of the most active retailers currently include Apple (NASDAQ: AAPL) , Dollar Tree (NYSE: DLTR) and Wal-Mart (NYSE: WMT), among others.

The strongest surge in growth plans is in those markets where unemployment is lowest, which could result in nice things for retail ETFs if the customers come calling.

Tisha Guerrero contributed to this article.