Retail ETF Deals You Should Not Miss On Black Friday

Black Friday – a shopping event that started only in the early 2000s – has secured its place in the schedule of busy Americans. The day after Thanksgiving may not be an official holiday, but its significance is no less thanks to the magic it casts on the economy.

Shoppers queue up in the cold for the best bargains that retailers can cough up for maximum profits. Most importantly, Black Friday kick starts the Christmas shopping season.

Retailers generate 20-40% of their annual revenue in the holiday season. So naturally, Black Friday will give a clear indication on what the financial status of retailers will be by the end of the holiday season.

Retail Earnings So Far

During Q3, the retail sector’s results so far reflect the ongoing struggle of traditional brick-and-mortar operators have getting consumers in their stores; the continued rise of online shopping has resulted in falling foot traffic across the industry.

As of November 18, 36 of the 43 retailers in the S&P 500 have reported Q3 results. Total earnings for these 36 retailers rose 7.4% year-over-year on 4.9% higher revenues. Within the bunch, 61.1% surpassed earnings estimates while a very low 44.4% beat top-line expectations, as per Zacks Earnings Trend.

According to Sheraz Mian, Zacks’ Director of Research, the retail sector’s Q3 earnings growth “compares favorably with historical periods.” He also noted that “Positive surprises are notably hard to come by in Q3, both for earnings as well as revenues. The proportion of retail sector companies beating EPS estimates is the second lowest of all 16 sectors in the index, with the sector the 6th lowest with respect to revenue surprises.”

Black Friday Shopping Projection

Over the last decade, Black Friday retailers have been racing to open earlier and earlier. This year, as in recent years past, many big box stores will kick off Black Friday sales on Thanksgiving Day. Though the operating backdrop for retailers is not quite upbeat, industry experts see numerous solid reasons for consumers to knock on retailers’ door, both brick-and-mortar stores as well as online, during the Thanksgiving weekend. After all, thrilling discounts are what cash-conscious American shoppers are looking for now.

Retailers have some very good reasons to cheer. A rebounding economy, falling unemployment rate, and increasing consumer sentiment all point to solid sales this year. The Thomson Reuters/University of Michigan preliminary November Consumer Sentiment reading came in at 91.6, up from the previous month’s figure of 87.2.

Data compiled by eMarketer suggests a 3.3% jump in total holiday sales (November and December), and a 17.2% increase in retail e-ecommerce sales this year. The National Retail Federation (NRF), the country’s largest retail trade group, projects a 3.6% jump during the holiday season to $655.8 billion (excluding autos, gas, and restaurant sales). Online sales for the season are forecast to increase between 7%-10% to as much as $117 billion. The NRF also notes that American consumers are planning on spending on average $935.58 this year, according to its survey conducted by Proper Insights.

Promotional Offers

Below we highlight some juicy offers from big-box retailers for Black Friday and the Thanksgiving weekend.

Amazon.com Inc. (NASDAQ:AMZN) should be a must-watch given the precedence of online sales. The company began promoting its Black Friday deals at the beginning of November. The company has been announcing new deals every five minutes ahead of Friday. Check them out here.

Everyone’s favorites store Target Corp. (NYSE:TGT) has been promoting its ‘2016 Black Friday ad’ for about a week now. Like last year, the retailer announced “no lines at target.com” this Black Friday with almost all its hot items accessible online.

Wal-Mart Stores Inc. (NYSE:WMT) will open its doors starting at 6 p.m. on Thanksgiving Day this year, while online offers kick off even before. Best Buy (NYSE:BBY) is also following suit, opening at 5pm this year on Thanksgiving, while Macy’s (NYSE:M) online offers have already begun.

ETFs to Play

Since this weekend is meant for retailers, a look at retail ETFs is worthwhile. While an individual stock pick is an option to play this deal mania, a basket approach can provide investors the same opportunity but with much lower risks. Below, we have highlighted three retail ETFs that investors should watch this weekend (read: The Complete Guide to Retail ETFs).

SPDR S&P Retail ETF XRT

This $901.62 million ETF charges 35 bps in fees. The fund holds about 104 securities in its basket. It is widely spread across each component as none of these holds more than 1.32% of the total assets. The fund has gained about 7.7% in the year-to-date timeframe. XRT has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Market Vectors Retail ETF (V:RTH)

This $108 million fund charges 35 bps in fees. The product is a large cap centric fund and is heavily concentrated on the top 10 holdings -- the largest allocations going to Amazon, Home Depot (NYSE:HD) and Walmart. RTH has gained 1.4% so far this year and has a Zacks ETF Rank of #1 (Strong Buy) with a Medium risk outlook.

PowerShares Dynamic Retail ETF (NYSE:M)

This fund has accumulated just $22.5 million in its asset base. The ETF charges 63 bps in fees per year. In total, the product holds 30 securities. PMR has gained about 0.65% this year and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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