Big Day For Retailers: 5 ETFs To Shop For Black Friday

An improving economy, acceleration in the job market, increasing consumer confidence and high spending power are all good tidings for the retail space this Black Friday. As the Christmas shopping season kicks off, retailers will charm Americans with the most magical discounts and promotional offers ever.

According to the National Retail Federation (NRF), as many as 137.4 million Americans are expected to shop both in-store and online during the Thanksgiving weekend (spanning four days — Thanksgiving Day, Black Friday, Small Business Saturday and Sunday). This is up from 135.8 million shoppers last year, suggesting that a larger number of people would take advantage of the Thanksgiving weekend deals (read: A Spread of Top-Ranked ETFs for Thanksgiving and After).

Black Friday is one of the busiest shopping days of the year with 74% Americans planning to shop on the day. Most of the shopping is expected to come from millennials as 86% and 78% of weekend shoppers that belong to the age brackets of 18–24 years and 25–34 years, respectively, are expected to spend on Black Friday.

While queuing up and camping out for Black Friday is as much of an American tradition as the feast itself, e-commerce or online will be the key source of sales. This is validated by the latest survey by Foursquare, which reveals that store traffic will likely decline 3.5% this year. Another report from the Accenture’s Annual Holiday Shopping Survey shows that 72% American plan to shop online on Thanksgiving day/night and 64% will opt online shopping on Black Friday.

Hot Retailers

Black Friday sales bonanza both online and in stores is already in full swing as a number of retailers have already perked up their deals to lure customers. We have highlighted some of the best deals from the retailers below.

Amazon (NASDAQ:AMZN) is ahead of all retailers with a first-of-its-kind month-long Black Friday promotion. The company has turned Black Friday into a Black Month with 35 days of deals. The online e-commerce behemoth will roll out new deals as often as every five minutes until December 22 on everything from electronics to clothing to toys. In addition, it will introduce thousands of 'Lightning Deals' throughout the day for a short period of time (see:all the Consumer Discretionary ETFs here).

The technology giant Apple Inc. (NASDAQ:AAPL) has joined the league of discounts this year with a “one-day shopping event” on Black Friday. Third-party retailers are offering discounted Apple products as door-buster specials this weekend.

Target (NYSE:TGT) started offering Black Friday deals online with free shipping on Thanksgiving Day. Some of the biggest deals include Powerbeats 2 Wireless Earphones for $89.99 (regular price $199.99), the Dyson V6 Animal Cordless Stick Vacuum for $299.99 (regular price $499.99), Apple Watch Series 1 starting at $198 (regular price $269.99) and the iPad Air 2 starting at $274 (regular price $399.99).

J.C. Penney (NYSE:JCP) and Kohl’s (NYSE:KSS) started offering their deals on Thanksgiving Day from 3 p.m. and 6 p.m., respectively. JCP is offering ‘‘spotlight savings’’ on select boots for women at $19.99, 25% off on select Nike (NYSE:NKE) styles for the family and up to 40% off on appliances. On the other hand, a couple of blockbuster deals at Kohl’s include a Haier 49-inch Ultra HD 4K TV for $249.99 (regular price $349.99), and a choice between a Sony PlayStation 4 500GB “Uncharted 4” console bundle and a Microsoft (NASDAQ:MSFT) Xbox One S 500GB “Minecraft” favorites console bundle for $249.99 (regular price $299.99 each).

Wal-Mart (NYSE:WMT) , the world's largest retailer, started Black Friday sales online at 12:01 a.m. on Thanksgiving Day and in stores at 6 p.m. The company is offering trademark discount on TVs including 4K models, computers/tablets, game consoles and accessories (read: Consumer ETFs in Focus as Wal-Mart Misses Q3 Revenue).

The office-supply retailer, Staples (NASDAQ:SPLS) did not open its stores until 6 a.m. on Thanksgiving Day but online deals were available earlier. In particular, laptops are available at throwaway prices with the best deal for HP laptop at $229.99 ($190 savings) and Microsoft Surface Pro 4 i5 tablet for $799 ($200 discount).

ETFs to Play

All these attractive offers are bound to boost retail sales and lead to a surge in stock prices in the months to follow. While an individual stock is certainly a great option to tap the Black Friday deals in the investment world, a basket approach through ETFs is diversified and more cost effective at lower risk. Below, we have highlighted retail ETFs that investors should stock up this weekend.

SPDR S&P Retail ETF XRT

This product tracks the S&P Retail Select Industry Index, holding 98 securities in its basket with none accounting for more than 1.5% of assets. Apparel retail takes the top spot at one-fourth share while specialty stores, automotive retail, and Internet retail round off the next three spots with double-digit allocations. The fund has amassed over $901 million in its asset base and charges 35 bps in annual fees. The fund has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook.

PowerShares Retail Fund (LON:PMR)

This fund follows the Dynamic Retail Intellidex Index. In total, the product holds 30 securities with none holding more than 5.3% of assets. In terms of industrial exposure, specialty retail takes the top spot at 41%, while food retail (19%) and hypermarkets (12%) round off the top three positions. The fund has accumulated just $22.5 million in its asset base and charges 63 bps in fees per year. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook.

VanEck Vectors Retail ETF (V:RTH)

This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 17.4% share while other firms hold no more than 7.2%. The ETF has a certain tilt toward specialty retail, which accounts for 29% share while Internet retail (21%), departmental stores (11%), hypermarkets (11%), and drug stores (9%) round off the top five. The product has amassed $108 million in its asset base and charges 35 bps in annual fees. RTH has a Zacks ETF Rank of 1 with a Medium risk outlook (read: Retail Sales Sustain Winning Momentum: ETF & Stock Bets).

Amplify Online Retail ETF IBUY

This ETF debuted in the space seven months ago and has already attracted $4.2 million in its asset base. It offers global exposure to companies that derive 70% or more revenue from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 42 stocks that are widely diversified, with each holding less than 3.7% of assets. The product charges 65 bps in fees per year.

First Trust Nasdaq Retail ETF FTXD

The fund follows the Nasdaq US Smart Retail Index and holds 49 stocks in its basket. It is moderately concentrated across components, with each firm holding less than 8.3% of assets. While specialty retailers and apparel retailers make up for a bigger chunk at 30.6% and 26.2%, respectively, broadline retailers, and food retailers & wholesalers round off the next two spots. FTXD has accumulated $2.1 million within two months of its debut and has an expense ratio of 0.60%.

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