By Benzinga.com
Despite the economic struggles gripping much of the domestic and global economy, consumers spent more than expected this holiday season.
The National Retail Federation reported Friday that holiday retail sales—a figure that tracks retail spending through November and December excluding restaurants, automobile dealers, and gas stations—rose 8.3% year-over-year in 2020.
According to the report, holiday sales increased in six of the nine retail categories, with online and other non-store sales (i.e. e-commerce, which was up 23.9%), building materials and garden supply stores (up 19%), and sporting goods stores (up 15.2%) leading the charge.
(It should also be noted that the Commerce Department, which tracks purchases made at stores, restaurants, and online, reported that U.S. retail sales declined 0.7% month-over-month in December, below the 0.2% estimate. The discrepancy could be due to high expectations from economists.)
Recent reports from a number of retailers support the idea that e-commerce demand was exceedingly strong in Q4.
Target Corporation /zigman2/quotes/207799045/composite TGT -1.07% reported December comparable sales rose 17.2%, but much of that growth was due to a 102% increase in digital sales for the period. Costco Wholesale Corp /zigman2/quotes/201191698/composite COST -2.00% had similar results. December comparable sales for the warehouse giant rose 10.7% while e-commerce sales rose 62.5%.
However not every retailer was saved by online demand.
Department store Nordstrom Inc /zigman2/quotes/203902116/composite JWN -1.12% reported holiday sales decreased 22% despite a 23% increase in digital sales. Signet Jewelers /zigman2/quotes/204614427/composite SIG +4.06% , the parent company of Kay Jewelers, Zales, and other jewelers, reported holiday sales did not grow year-over-year, despite a 60% increase in e-commerce.
In specialty retail, L Brands, Inc. /zigman2/quotes/202062875/composite LB +1.37% reported comparable sales rose 5% across its portfolio of companies. That was driven by a 17% increase in Bath & Body Works, which counteracted a 9% decrease at Victoria’s Secret. Zumiez /zigman2/quotes/210420137/composite ZUMZ -3.06% said holiday sales rose just 1.7%.
All of this to say that retail, at least its online iteration, is alive and well in the pandemic, and it’s driving traders to the trade. This is evidenced by the recent performance of the Direxion Daily Retail Bull 3X Shares /zigman2/quotes/202341669/composite RETL -9.24% , which has surged to a new all-time high in January.
Not only has RETL risen higher by nearly 40% in the last month, but the fund has taken in over $341 million in inflows during that span—over $100 million more than the next closest Direxion fund.
RETL provides three times the daily performance of the S&P Retail Select Industry Index, and holds all of the stocks mentioned above.
However what has really driven the fund in recent weeks is its exposure to several high-flying stocks. As of Jan. 19, nearly 5% of the fund was composed of Magnite Inc /zigman2/quotes/208483704/composite MGNI -14.96% , Blink Charging /zigman2/quotes/205311237/composite BLNK -9.76% and Gamestop /zigman2/quotes/203755179/composite GME +18.56% .
Consumerism Is King
The bottom line is that strong retail sales are a product of the fact that American consumers are in a fairly healthy position in spite of the global pandemic. Government measures, as well as the convenience of e-commerce, have surely helped facilitate this trend.
Altogether, these factors may further support strong online spending in 2021. And with another round of stimulus expected from the Biden administration, it’s not out of the question to think the bullish retail trade could continue.
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