The Retail Apocalypse: Four Retail ETFs to Short? XRT, PMR, RTH & RETL

TheEconomicCollapseBlog.com has a shocking post entitled, "20 Facts About The Great U.S. Retail Apocalypse That Will Blow Your Mind," which might make you want to consider shorting or reevaluating any investment strategies involving retail or retail ETFs like the SPDR S&P Retail ETF (NYSEARCA: XRT), PowerShares Dynamic Retail ETF (NYSEARCA: PMR), Market Vectors Retail ETF (NYSEARCA: RTH) and Direxion Daily Retail Bull 3X Shares (NYSEARCA: RETL). Before you dismiss something from a blog with the words "Economic Collapse" in it (they are, after all, peddling "doom and gloom") because the Obama administration plus Joe Biden and their surrogates in the media keep telling you there is an economic recovery along with growth in jobs, consider just the following retail store closure plans or job cuts mentioned in the post:

Radio Shack: More than a thousand stores Staples: 225 stores J.C. Penney: 33 more stores Sears: About 300 stores since 2010 (CNN is reporting that Sears is "expected to shutter another 500 Sears and Kmart locations soon") Target: 475 jobs and not fill 700 positions that are currently empty Aéropostale: 175 stores (projected) over the next couple of years Macy's: five stores and eliminating 2,500 jobs The Children's Place: 125 of its "weakest" stores by 2016 Best Buy: About 50 stores up in Canada Blockbuster: All of their stores American TV: All 11 stores

In addition, the blog post notes that a billion square feet of retail space is sitting vacant in the United States, up to half of all shopping malls in America may shut down within the next 15 to 20 years, Office Depot sales have declined for 13 quarters in a row, sales at US supermarkets will decline by 1.7 percent this year (even as the overall population continues to grow) and analysts think that even Wal-Mart should close approximately 100 "underperforming" supercenters in rural locations across America. Of course, Amazon.com and the rise of online shopping along with management missteps (e.g. J.C. Penney etc) does share some of the blame for the closing of brick and mortar stores.  

With that in mind, here is a quick look at four retail ETFs:

SPDR S&P Retail ETF. Tracking the S&P Retail Select Industry Index, the SPDR S&P Retail ETF has 101 holdings with none having more than a 1.5% allocation. As of last Friday, the SPDR S&P Retail ETF has the following sector allocation: Apparel Retail (26.01%), Specialty Stores (17.27%), Automotive Retail (14.24%), Internet Retail (12.23%), Food Retail (7.92%), General Merchandise Stores (6.47%), Department Stores (6.11%), Drug Retail (3.40%), Hypermarkets & Super Centers (2.76%), Computer & Electronics Retail (2.64%) and Catalog Retail (0.94%). The SPDR S&P Retail ETF has a market cap of $758.21 million and has a daily trading volume of around 375,000 shares.

PowerShares Dynamic Retail ETF. Based on the Dynamic Retail IntellidexSM Index, the PowerShares Dynamic Retail ETF invests in 30 stocks that are principally engaged in operating general merchandise stores such as department stores, discount stores, warehouse clubs and superstores; specialty stores, including apparel, electronics, accessories and footwear stores; and home improvement and home furnishings stores. The biggest holdings with around a 5% allocation each include Kroger Co, CVS Caremark Corp AutoZone Inc, Macy's Inc, Michael Kors Holdings, O'Reilly Automotive, Whole Foods Market and Walgreen. As of Monday, the ETF had the following sector allocation: Consumer Discretionary (50.09%), Consumer Staples (41.76%), Industrials (5.50%) and Materials (2.65%). The PowerShares Dynamic Retail ETF has a market cap of $28.48 million and a daily trading volume around 6,500 shares.

Market Vectors Retail ETF. Tracking the Market Vectors US Listed Retail 25 Index, the Market Vectors Retail ETF has 26 holdings in the following sectors at the end of February: Consumer Discretionary (53.2%), Consumer Staples (35.2%) and Health Care (11.8%). All of the Market Vectors Retail ETF's holdings are large cap stocks with the following stocks having at least a 5% allocation or more: Amazon.Com Inc (8.28%), Wal-Mart Stores Inc (8.05%), Home Depot Inc (7.53%), Walgreen Co (5.73%), Cvs Caremark Corp (5.70%), Lowe's Cos Inc (5.21%), Mckesson Corp (5.06%) and Tjx Cos Inc (5.00%). The Market Vectors Retail ETF has a market cap of $25.56 million and a daily trading volume around 7,800 shares.

Direxion Daily Retail Bull 3X Shares. Seeking a return of 300% of the performance of the Russell 1000 Retail Index, the Direxion Daily Retail Bull 3X Shares tracks an index comprised of companies that sells discretionary products supplied by manufacturers. These companies include specialty retailers as well as diversified retailers such as department stores, discount stores and superstores, but no retailers selling consumer staples (e.g. supermarkets, drugstores and liquor stores). At the end of last year, the index had the following sector allocation: Hypermarkets & Super Centers (19.18%), Home Improvement Retail(18.70%), Internet Retail (17.78%), Apparel Retail (12.07%), General Merchandise Stores (8.61%), Automotive Retail (6.07%), Specialty Stores (5.27%), Department Stores (5.26%), Homefurnishing Retail (2.73%), Computer & Electronics Retail (1.80%), Catalog Retail (1.67%) and Personal Products (0.87%). The Direxion Daily Retail Bull 3X Shares would be using leverage to earn its augmented performance. Otherwise, Direxion Daily Retail Bull 3X Shares has a market cap of $17.97 million and a daily trading volume around 1,100 shares.

Finally, here is a look at the performance of all three retail ETFs:

As you can see from the above chart, betting against retail since the end of the financial crisis has been a loosing bet, but notice how performance has also leveled off in recent months:

The Bottom Line. Of course, news of store closings and job losses can have the opposite effect on an individual stocks after the announcements are made as some investors bet on a turnaround plus retailers will inevitably blame the weather for any poor performance over the past few months. Nevertheless, the state of American retail and the economy in general should have you revaluating any long positions in the SPDR S&P Retail ETF, PowerShares Dynamic Retail ETF, Market Vectors Retail ETF and Direxion Daily Retail Bull 3X Shares.