Lagging Retail Stocks Will Soon Face Their Next Big Test

By Akane Otani 

Friday is shaping up to be a big day for retail stocks.

The group has generally lagged behind the broader market this year, hurt by investor worries about store closures, tariffs and declining sales among bricks-and-mortar outlets.

The SPDR S&P Retail exchange-traded fund has risen about 7.4% in 2019, trailing behind the S&P 500, which is up 23%.

Investors will get their next look at whether the group might be able to stage a rebound Friday, when the Commerce Department releases retail sales figures for the month of October.

Last month's report fell short of analysts' expectations. Spending at stores, restaurants and online outlets decreased a seasonally adjusted 0.3% in September from the prior month, marking the first decline since February and disappointing economists who had expected a slight pickup in spending.

That was a fresh setback for the group. While discount retailers and e-commerce stocks like eBay Inc. and Amazon.com Inc. have logged double-digit percentage gains for the year, thanks to robust spending online, many specialty retailers and department stores have fared far worse. GameStop Corp., for instance, is down 53% for the year; Signet Jewelers Limited is down 47%, and Macy's Inc. is off 46%.

Friday's report will be key "not only for the critical implications for consumption and its role in the broader growth picture, but also as a confirmation or refute of last month's troubling headline decline," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets, in a research note.

The upside? Economists do expect some improvement for Friday's report. Those surveyed by The Wall Street Journal are forecasting a 0.2% increase in retail sales for October. Excluding auto sales, which were a major drag on September's results, that estimate rises to 0.4%.

Stay tuned to see if retail stocks can turn a tough 2019 around.

Write to Akane Otani at [e-mail]

(END) Dow Jones Newswires

November 13, 2019 12:22 ET (17:22 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.