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  • Thematic Investing

    Opportunities in Retail Stocks as Consumers Stock Up?

    Denis Zinoviev, Associate Product Manager, ETFs
    April 16, 2020
     

    Many retail stores have closed amid the current COVID-19 induced economic shutdown. As analysts raise concerns about bankruptcies and supply shocks, the thought of gaining an exposure to retail in a portfolio may seem counter-intuitive. However, some segments of this market are seeing soaring demand.

    According to Moody’s research, their analysts expect that "consumers will continue to front-load purchases of food and other consumables for weeks to come as they ride out the pandemic. This will increase sales volume and also boost profits because consumers are less price sensitive when the need for essentials is so strong."1

    Some large retailers that are focused on e-commerce, groceries or other essential products have been experiencing unprecedented sales volumes as the rush to stock up on household essentials continues. In the two weeks ending March 22, 2020, U.S. grocery sales are up 83% from the same period last year.At a time when many other industries are seeing large-scale layoffs, these retailers are on a hiring spree to help address the rise in demand. Amazon has hired 80,000 workers over the course of a few weeks as part of its plan to add 100,000 to its workforce3, while Walmart plans to expand its employee base by 10%.4

    Accessing the Investment Opportunity

    The VanEck Vectors® Retail ETF (RTH®) offers exposure to companies involved in retail, including distribution, wholesalers, online retailers and retailers of food and other staples. Amazon, Costco, Walmart and CVS are among its largest holdings. Year-to-date as of April 6, 2020, RTH was significantly outperforming the S&P 500, at -9.4% vs -17.2%, respectively.

    YTD Total Return (Indexed to 100)

    YTD Total Return (Indexed to 100)

    Source: FactSet. Data as of 4/8/2020. Past performance is not a guarantee of future results.


    Average Annual Total Returns (%): Month end as of March 31, 2020
      1 Mo† YTD† 1 Yr Life
    (12/20/11)
    RTH (NAV) -6.17 -12.29 1.50 14.87
    RTH (Share Price) -6.43 -12.34 1.40 15.00
    MVRTHTR (Index) -6.23 -12.35 1.35 14.69

     

    Average Annual Total Returns (%): Quarter end as of March 31, 2020
      1 Mo† YTD† 1 Yr Life
    (12/20/11)
    RTH (NAV) -6.17 -12.29 1.50 14.87
    RTH (Share Price) -6.43 -12.34 1.40 15.00
    MVRTHTR (Index) -6.23 -12.35 1.35 14.69

    The table presents past performance which is no guarantee of future results and which may be lower or higher than current performance. Returns reflect temporary contractual fee waivers and/or expense reim¬bursements. Had the ETF incurred all expenses and fees, investment re¬turns would have been reduced. Investment returns and ETF share values will fluctuate so that investors’ shares, when redeemed, may be worth more or less than their original cost. ETF returns assume that distributions have been reinvested in the Fund at “Net Asset Value” (NAV). NAV is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. VanEck Vectors ETF investors should not expect to buy or sell shares at NAV.

    Returns less than a year are not annualized.

    Expenses: Gross 0.47%; Net 0.35%. Expenses for RTH are capped contractually at 0.35% until February 1, 2021. Cap excludes acquired fund fees and expenses, interest expense, trading expenses, taxes and extraordinary expenses.

    DISCLOSURE

    1Source: https://www.investors.com/news/walgreens-earnings-q2-2020-wba-stock/
    2, 4Source: https://www.barrons.com/articles/buy-these-grocery-stocks-they-were-good-bets-before-coronavirusand-still-are-51585850916
    3Source: https://www.wsj.com/amp/articles/amazon-has-hired-80-000-workers-out-of-100-000-plan-announced-weeks-ago-11585840027

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    An investment in the VanEck Vectors®Retail ETF (RTH®) may be subject to risks which include, among others, investing in retail companies, equity securities, consumer discretionary, consumer staples sector, depositary receipts, issuer-specific changes, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund.

    Fund shares are not individually redeemable and will be issued and redeemed at their net asset value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading fund shares in the secondary market. Past performance is no guarantee of future results.

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