Is there a Respite for America’s Ailing Retail Industry: VanEck Vectors Retail ETF (NYSEARCA:RTH)?

A few years ago before the turn of the 21st century, America’s retail industry was booming. This was largely evidenced by the opening of superstores and mega malls anchored on the stores of big box retailers such as Wal-Mart Stores Inc (NYSE:WMT).

However, this boom has been slowly eroded by the emergence of online retailers such as Amazon.com, Inc. (NASDAQ:AMZN). Online retailers have overtaken physical retailers such that the latter have been forced to embrace e-commerce in order to remain competitive.

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America’s retail industry is currently on a downtrend as online retailers keep growing their share of the entire industry. It is now an accepted fact among industry experts that the online retail market is growing, while steadily replacing the physical retail store model.

None of the physical retailers has been spared. Recent reports indicate that many physical retailers have closed some of their stores due to declining sales.

Recently, J C Penney Company Inc (NYSE:JCP) announced that its CFO Edward Record would be leaving the retailer to pursue other interests.

During Edwards’s tenure, J C Penney was able to restructure about $1.4 billion in debt, but the company has continued to struggle despite its better financial position. The company reported a 3.5 percent decline in same-store sales in May this year as opposed to the expected 0.6 percent drop. The retailer also reported lower-than-expected revenues.

On the other hand, ESL Partners LP, which is owned by Eddie Lampart the CEO of Sears Holdings Corp (NASDAQ:SHLD), announced that it had initiated buyout negotiations with Sears Canada. Sears Canada was spun-off Sears Holdings Corp in 2012, but the company has recently struggled to stay afloat due to competition from big box retailers.

ESL Partners LP is working in collaboration with Fairholme Capital Management LLC to help the distressed retailer restructure its operations under bankruptcy protection. However, Eddie Lampart was categorical that the negotiations might not result in a deal.

Retail sector ETFs such as the VanEck Vectors Retail ETF (NYSEARCA:RTH) and the SPDR S&P Retail (ETF) (NYSEARCA:XRT) have been declining due to the challenges facing the industry.

The future of the American retail industry remains in the balance as physical retailers embrace e-commerce in order to compete with online retailers.

We have provided trading reports for all of these retail stocks and they are ready for review.

 

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