Retail Sales - Changing Dynamics

Includes: AMZN, XLP, XLY, XRT
by: Ted Kavadas


Discusses various changes occurring in retail sales.

Displays two charts depicting notable changes in retail stocks.

Discusses implications of these changing dynamics.

On May 1, 2014, I wrote an article titled "Various Thoughts Concerning Retail Sales" that discussed various notable changing aspects of retail sales, including aspects of rising stress in retailing.

Subsequent to that post, there have been additional noteworthy developments concerning retail sales and retail stocks.

As many are aware, April advance retail sales were considered to be disappointing. In addition, various individual retailers have posted quarterly results that either have been below estimates and/or otherwise were found to be disappointing.

As well, various retail stocks seem to be exhibiting notable "price action," with many under pressure. Among these stocks include Amazon (NASDAQ:AMZN). A broader selection of prominent retail stocks - as well as the Retail SPDR XRT - appear to be flagging in price momentum.

AMZN and XRT are seen depicted on a daily basis below since 2008, compared against the S&P 500, in green. For reference purposes, I have added the 200dma to each chart:

(chart courtesy of; chart creation and annotation by the author)

Additionally, the ratio between "consumer discretionary" stocks and "consumer staples" stocks has lately taken on a different tone. Many view this ratio as an indicator of the vitality of consumer spending. I view the XLY (Consumer Discretionary SPDR) and the XLP (Consumer Staples SPDR) as proxies for the consumer discretionary and consumer staples stocks. The chart below shows the XLY, the XLY:XLP ratio, and the XLY as a ratio to the S&P 500, all with 200dma lines added. As can be seen, the XLY:SPX ratio has recently significantly broken below the 200dma, and the XLY:XLP ratio - even though it is still at high levels - lately has been undergoing a significant decline, one of only a few since mid-2009:

(chart courtesy of; chart creation and annotation by the author)

Other notable aspects in retailing include increasing price discounting, which appears to be intensifying in many segments. I have frequently discussed these pricing issues in my site.

While - all told - retail sales and retail stocks still (especially from a long-term perspective) generally appear to exhibit various degrees of growth, many of the changing dynamics will continue to present challenges both for retail sales as well as the broader economy in general.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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