As a pioneer in retail business, the United States provides ample growth opportunities for all types of retail companies. The retail industry covers everything in its scope, ranging from internet catalog sales, auto dealers, convenience stores,vending machines and clothing; thus dividing retailers into numerous categories.
Retailers of all sizes, including individual direct marketers or direct sellers, small- to medium-sized franchise unit owners, and large “big-box” store operators compete in the U.S. (Read: Buy These High Beta ETFs For a Santa Claus Rally)
From a growth perspective, the retail sector is among the leading U.S. industries, and employs an enormous workforce. Retailers nowadays are largely concentrating on buyers’ needs and luring consumers with innovative products, attractive discounts, free shipping and the ease of shopping through smartphones and tablets.
Retail is no different from other U.S. industries and is highly dependent on the economy to prosper. Such heightened dependence on the economy and factors like job growth and interest rates indicate that a speedy recovery of the economy is vital for the health of the retail industry.
While the unemployment rate has decreased considerably over time, consumers are now beginning to draw out their savings to spend, anticipating some economic recovery.
So far this year, the broader markets have portrayed signs of a better pace of recovery and have thus sparked hopes of a better economic scenario going forward. The significant recovery in the stock market is reflected through strong gains for the broader market indices. (Read: 3 ETFs For This Holiday Season)
The retail industry is highly competitive and encounters significant challenges. Although the U.S. economy has started witnessing a recovery, we believe that 2013 will not mark its complete resurrection. Consumers are slowly regaining confidence and cautiously increasing their spending. Consumer spending accounts for over 2/3rd of the U.S. economic activity.
Playing the Sector through ETFs
ETFs present a low-cost and convenient way to get a diversified exposure to this sector. Below we have highlighted a few ETFs tracking the industry: (See all Retail ETFs Here)
SPDR S&P Retail (XRT)
Launched in Jun 2006, SPDR S&P Retail (NYSEARCA:XRT) is an ETF that seeks investment results corresponding to the S&P Retail Select Industry Index. This fund consists of 98 stocks, with the top holdings being Rite Aid Corporation (RAD), The Men’s Wearhouse Inc. (MW) and Vitamin Shoppe Inc. (VSI), representing asset allocation of 1.39%, 1.32% and 1.31%, respectively, as of Nov 22, 2013.
The fund’s expense ratio is 0.35%, while dividend yield is 1.09%. XRT has AUM of $967.8 million as of Nov 20, 2013.