Holiday Shopping Season Is Looking Good For This Retail ETF

It's not Christmas in August, but some trends in the retail space could be setting up nicely for an impressive holiday season for the ProShares Decline of the Retail Store ETF EMTY.

What Happened

Of course, since EMTY is an inverse exchange traded fund designed to profit from weakness by traditional brick-and-mortar retailers, the fact that early holiday shopping data points look good for the ProShares ETF could mean some bad vibes for standard retail investments.

EMTY is designed to deliver the daily inverse performance of the Solactive-ProShares Bricks and Mortar Retail Store Index. That index “is the first comprehensive, public securities index composed solely of traditional retailers, and is positioned to potentially become an industry standard for measuring the health of bricks and mortar retailers,” according to ProShares.

Why It's Important

With retail stores closing by the the thousands across the U.S. and the industry realizing many more spots need to be shuttered, these are good times for EMTY as highlighted by the fund's month-to-date gain of 6.21%. More upside could be coming for EMTY.

“There’s 'mounting evidence' that stores have 'significantly lowered their inventory receipt plans ahead of holiday 2019,'” Credit Suisse analysts led by Michael Binetti wrote in an Aug. 8 note.

EMTY is also worth a go right here, right now because a slew of department stores, including some featured in the fund's index, are about to report earnings and the guidance is expected to be poor.

“And store cost structures will be under even more near-term pressure, with broad new tariffs on goods from China expected to kick in next month,” according to Bloomberg.

EMTY allocates 6.22% of its weight to department stores.

What's Next

E-commerce is pressuring department store operators in a big way. The good news is EMTY was designed specifically to help investors take advantage of that trend.

“Physical retailers are under immense pressure. E-commerce is threatening to take over retail as consumer habits change, shopping moves online, and physical stores struggle to remain viable. With this disruption comes opportunity,” according to ProShares.

Poor guidance by apparel retailers would also boost EMTY because those stocks account for 27.1% of the fund's underlying index. That index features no exposure to dedicated online retailers

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