The Amplify Online Retail ETF (IBUY) declined 4.7% in the second quarter (Q2) of 2024 while the S&P Retail Select Industry Total Return Index returned -4.5%. Over the last year, IBUY is up 3.3% vs. 4.6% for the S&P Select Retail Index.
Second quarter stock market performance continued its upward trend, albeit at a slower pace than the first quarter of the year, with the S&P 500 TR Index advancing another 4.3%. YTD the market has risen 15.3% despite higher for longer interest rates and mixed economic data. Artificial intelligence stocks continue to be the fuel propelling market gains, with the technology and communication services sectors leading the way.
The environment for online retail stocks remains strong, as price conscious consumers continue to seek bargains, selection, and convenience online. The U.S. Census Bureau’s Q1 2024 Ecommerce Report 1 released in May showed that ecommerce is now 15.9% of total retail sales, increasing year-over-year at 8.6% growth versus only 1.5% for total retail sales. Brick-and-mortar retailers with a good ecommerce platform continue to face bankruptcies and underperform. But the index’s equal-weighting approach, skewing it into smaller cap names, has been a headwind in the current high interest rate environment.
Top performers contributing to returns include Carvana (+46.4%), Chewy Inc (+71.2%),
and Him & Hers Health (+30.5%). 2 Click here for IBUY’s top 10 holdings.
Shares of online car retailer Carvana continue to soar higher as a comeback story which has gained more than 500% over the last year. It continues to exhibit momentum on operational improvements.
Chewy, an online retailer of pet products, has seen its shares gain on the disclosure that meme stock champion Keith Gill aka Roaring Kitty had accumulated shares in the name. Prior to the announcement, shares of Chewy had risen 15% so far in 2024 but fell in the three preceding years as spending on pets slowed after a post-pandemic boom.
Digital health and wellness company Him&Hers spiked on the announcement it would be selling compounded semaglutide GLP-1 weight loss drugs. Hims & Hers will supply its GLP-1 medications from BPI Labs, which is registered with the FDA. The company also posted a first quarter earnings beat, with revenue growth of 46% year-over-year, and upped its second quarter guidance.
Detractors on performance for the period included Beyond (-63.6%) and Trip Advisor (-35.9%).
The turnaround story for online home goods retailer Beyond was called into question after the parent of Bed Bath & Beyond, Overstock, Zulily, and other brands missed first-quarter results. The company appears to be losing traction with consumers and margins are on the decline as it fails to compete with peers like Amazon.
Shares of online travel platform TripAdvisor declined after reporting during its quarterly earnings call that it was not for sale. The company has a complicated structure that includes Liberty Media. Liberty Tripadvisor has redeemable preferred stock with a redemption date of March 27, 2025. It will cost the company around $300 million to redeem the issue, but it doesn't have the money. Meanwhile, the company’s Viator tour reservation business continues to grow so that may be a way to unlock value down the line.
Post the pandemic, retail sales have been mixed as high interest rates and inflation continues to weigh on consumers. Consumer spend appears to be slowing as real income growth is moderating. Furthermore, some consumers are becoming credit constrained amid higher credit card interest rates and rising credit card utilization. Shoppers have steadily slowed spending growth this year, revealing a crack in what has been a resilient economy.
Online spending continues to dominate, driven by rising demand for cheaper products.
According to Adobe's data 3 , the share of the cheapest units sold in categories like grocery and personal care has increased this year, while the share of the most expensive products has declined, confirming that consumers are looking for cheaper alternatives.
Click here to see performance tables.
All data as of 6/30/2024. Subject to change at any time. Fund holdings should not be considered recommendations to buy or sell any security. View Current Complete Holdings
Index Definitions:
S&P Select Industry Indices are designed to measure the performance of narrow GICS® sub-industries. The S&P Retail Select Industry Index comprises stocks in the S&P Total Market Index that are classified in the GICS Apparel Retail, Automotive Retail, Broadline Retail, Computer & Electronic Retail, Consumer Staples Merchandise Retail, Drug Retail, Food Retailers and Other Specialty Retail sub-industries.
The Standard & Poor's (S&P) 500 Total Return Index is an unmanaged, market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value, and assumes distributions are reinvested back into the index. It does not include fees or expenses. It is not possible to invest directly in an index.
1https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
2All percentages shown indicate total return of the sector for the month.
3https://www.reuters.com/business/retail-consumer/us-online-retail-spending-up-7-jan-april-driven-by-demand-cheaper-products-2024-05-09/