The Market Vectors®Retail ETF (RTH) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors US Listed Retail 25 Index (MVRTHTR). The Index is a rules-based index intended to track the overall performance of 25 of the largest U.S. listed, publicly traded retail companies.
See more details on sponsor's website
The negative retail drums keep beating louder this morning with a string of companies (Fred's, Stein Mart, Buckle) showing negative same-store sales for February and Costco showing some uncharacteristic weakness.
The week has also seen RadioShack and Staples decide to close stores en masse and strong hints from other retailers that the promotional stance from the holidays has been tough to shake off.
The National Retail Federation's delivers a mixed read on the January Retail Sales. The group notes that although severe winter weather was a major factor in the flat seasonally-adjusted growth rate, the high level of jobless claims and slow consumer spending trends suggest larger macroeconomic issues are also in play.
"No one can jump to any solid conclusion until we shovel out of the snow," concludes the NRF.
ICSC attributes the weekly dip in retail sales to weather patterns, but a few bright spots did emerge.
Despite slow traffic patterns, categories which showed strength included wholesale clubs (WMT, COST, PSMT) and furniture stores (LZB, ETH, HVT, PIR, BBBY)
For the full month, the research group sees monthly comparable-store sales growth of between 3.0% and 3.5%. That mark reps solid sales growth for the period compared to prior forecasts, although ICSC warns the figure could change again with the weather.
Retail analytics firm Applied Predictive Technologies notes its data indicates that retail sales fell 9.6% during the most intense period of the Polar Vortex (January 5-7) as consumers stayed home. It also pointed to soft traffic days in December related to winter storms and frigid temperatures.
Chicago and Detroit were the two major cities where sales were hit the hardest by the Polar Vortex. Walgreens (WAG) has a sizable presence in both regions.
The read falls in line with what automakers and big-box retailers have been reporting, but also makes the few out-performers during the period stand out even more. Costco (COST), L Brands (LB), Under Armour (UA), and Chipotle (CMG) come to mind.
If you're looking for a bear on the retail industry, look no further than Starbucks (SBUX) CEO Howard Schultz.
During his company's earnings conference call, Schultz didn't blame the weather, strapped consumers, or heavy promotions for comparable-store sales falling below expectations as he warned on a larger trend: A lack of boots in the streets.
"Holiday 2013 was the first in which many traditional brick-and-mortar retailers experienced in-store foot traffic give way to online shopping in a major way," said Schultz.
He says the "pronounced" shift in consumer behavior is accelerating and isn't likely to reverse, but Starbucks is one of the few B&M chains well-positioned to evolve while the ground crumbles around the retail landscape.
The FBI has discovered about 20 cyberattacks against retailers in the past year similar to the one against Target and has warned companies to prepare for more attempts to breach their systems.
The attack on Target used "memory-parsing" malware that infects point-of-sale (POS) systems such as cash registers and credit-card swiping machines to steal information from tens of millions of cards.
"The accessibility of the malware on underground forums, the affordability of the software and the huge potential profits to be made from retail POS systems in the United States make this type of financially motivated cyber crime attractive to a wide range of actors," the FBI said.
"Everybody we work with in the retail space is scared to death," says a cyber-security consultant. "They don't have a lot of defenses to prepare against these types of attacks."
The hacker behind the massive data breach at Target (TGT -1%) is a 17-year old Russian, according to intelligence firm IntelCrawler.
Though Target and Neiman Marcus have been front and center with their disclosures, the malicious malware involved in the attack is now out in the wild and could be used against any retailer which has a point-of-sale vulnerability.
The scope of the security breach, along with the sudden interest by Congress in the issue, has increased the likelihood that the entire retail sector may be forced to upgrade their systems at a steep cost.
Retail ETFs continue to under-perform market indexes for the year as the hits keep coming in the sector. Today's dismantling of Best Buy follows up a relentless string of guidance cuts from apparel sellers and department store chains.
Though many companies are taking advantage of their vibrant e-commerce channels, in most cases it's not enough to make up for soft store traffic.
Weakness at malls in particular is a risk for the group. In that vein, five of the top ten holdings (FRAN, ANF, M, FINL, CAB) of the S&P Retail ETF (XRT) are companies that frequently set up shop at or near malls.
The National Retail Federation reports holiday sales rose 3.8% Y/Y to $601.B to fall just short of the forecast for a 3.9% gain.
If the 3.8% rise doesn't jibe with the rash of sales warnings piling up in the retail sector, it's due in part to the reliance of the industry on promotions and e-commerce channels this year to pick up the slack from soft store traffic. For the most part, margins suffered mightily this holiday season.
Retail ETFs are getting harder hit than the market as a whole as a slew of profit and sales warnings pile up with the XCR XChange Conference in full swing.
While data reads showing weak store traffic and heavy promotions in the sector during the holiday shopping season have been out for a few weeks, there have also been a few surprises on the low-end with discounters and with high-end apparel sellers which has chipped away at trust in Q1 retail sales.
What to watch: A report of December retail sales is due out tomorrow. To take a pulse on the sector, back out automobiles, housing-related purchases, and furniture to see what kind of growth rate survives. The number could come in flat.
Major retailers other than Target (TGT) were the victims of cyber-attacks on customer credit card data during the holiday season, with Reuters reporting that hackers breached at least three well-known chains using methods similar to those used on Target.
However, as is often the way in the sector, the companies involved have yet to disclose the assaults.
The attacks are in addition to one on Neiman Marcus. The luxury retailer said on Friday that it is looking into the theft of data from customer payment cards, although the luxury department store doesn't know how many people have been affected.
Gartner analyst Avivah Litan says she learned about a separate series of beaches going back to a few months before Thanksgiving. These could have been used as trial runs for the big assault on Target, which said on Friday that the data of up to 70M people may have been stolen, not the 40M that was previously disclosed.
Though the economy might pick up this year and provide a little more spending cash for consumers, analysts warn that retailers will face the tricky task of reversing the dependence of shoppers on deals and promotions.
A younger generation of consumers is growing up shopping empowered by their mobile devices and deal sites such as RetailMeNot.com (SALE).
Deloitte's Alison Paul thinks brands which come up with a must-have product or can differentiate themselves will be the ones to emerge from the promotional setting.
After the S&P Retail ETF (XRT) rose 36% last year some analysts are openly wondering if it's time for investors to pay the piper as negative momentum in the sector picks up even more steam.
SW Retail Advisors' Stacey Widlitz thinks that judgement day might be here after taking in the early round of disappointing reports on holiday sales from the retailer group. The final straw could be a disappointing read on the dollar store group which was forecast to be a resilient trade-down bet.