Coronavirus Hits Feb Retail Sales: Winning & Losing ETFs

U.S. retail sales declined 0.5% sequentially in February, following an upwardly revised 0.6% uptick in January and missing market expectations of a 0.2% rise. The February figure marked the largest decline since December 2018. This gives a clear sign of what’s due for March, the month when the U.S. economy almost came to a halt owing to the coronavirus eruption.

Consumer spending makes up about 70% of U.S. economic activity. Thus, any contraction in it will likely drag the economy into recession. February’s sales report should serve as a guide for March and investors can easily get an idea about what’s awaiting the various industries in the ongoing virus-inflicted month. Below we highlight a few such areas and the related ETFs.

Industries That Survived

Online Stores

Non-store retail trade in February jumped 0.7% sequentially and 7.5% year over year. Non-requirement of physical presence amid growing fears of virus contamination has been aiding the space (read: Is Coronavirus a Boon for Online Retail ETFs?).

ProShares Long Online/Short Stores ETF (NYSE:CL)

The underlying index consists of long positions in online retailers included in the ProShares Online Retail Index and short positions in the bricks and mortar retailers included in the Solactive-ProShares Bricks and Mortar Retail Store Index (read: Beat Virus With 2 Sector ETFs & Stocks That Survived 2008 Crisis).

Groceries & Healthcare Essentials

Grocery and Health & personal care stores saw a marginal decline of 0.1% in February. Sales of hobby, musical instrument, & book stores (requirements during home confinement) rose 0.1% in the month. Department stores saw a nominal sales decline of 0.2% in the month.

Amid the ongoing virus scare, soap and clean materials companies like Zacks Rank #2 (Buy) Procter & Gamble Company (NYSE:PG) , Zacks Rank #3 (Hold) Clorox Company (NYSE:CLX) (NYSE:CL) and Zacks Rank #3 Colgate-Palmolive Company (NYSE:CL) should do well.

Staples companies like Costco Wholesale Corporation (NASDAQ:COST) and Walmart Inc. (NYSE:WMT) are also likely to stay afloat as consumers’ need for daily essentials will help their March quarter sales.

On the ETF front, Consumer Staples Select Sector SPDR ETF (NYSE:XLP) XLP is likely to remain steady amid the market turmoil for the same reason (read: Tackle Market Gyrations With Buffett's Style of ETF Investing).

Major Losers

Clothing

Many mall-based clothing stores have seen a decline in footfall. Nordstrom (NYSE:JWN) was the first department store chain to announce that it would temporarily shut all 380 stores, including 116 department stores, to help prevent the spread of the virus. Apparel sales fell 1.2% sequentially in February.

SPDR S&P Retail (NYSE:XRT) ETF (XRT

The underlying S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. Apparel Retail takes about one-fourth of the fund. The fund may face more pain in March.

Gas Stations

Receipts declined 2.8% at gasoline stations in February, thanks to a sharp decline in the price of oil. Moreover, the travel restrictions are another concern for the space.

United States Gasoline ETF UGA

The underlying Gasonline Price Index looks to reflect changes in gasoline prices, as measured by the price of the contract on unleaded gasoline for delivery to the New York harbor, traded on the NYMEX that is the near month to expire, except when the near contract is within two weeks of expiration, in which case it will be measured by the contract that is the next month contract to expire (read: 5 Top-Performing Commodity ETFs of 2019).

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