‘Inverse’ ETF profits from retailers’ woes

Betting against the traditional retail store just got easier. There’s now a way for Main Street investors to profit from the declining fortunes of store-based retailers and malls getting decimated by Amazon and other online retailers.

ProShares recently launched a new exchange traded fund (ETF) that makes money when a stock index that tracks 56 traditional retailers falls in value. The ProShares Decline of the Retail Store ETF (symbol: EMTY) is a long-term bet against brick-and-mortar retailers, including department stores and supermarkets, as well as sellers of apparel, home electronics and other items.

This so-called “inverse” ETF delivers returns that are the “opposite” of the bricks-and-mortar retail index that it tracks. In other words, if the daily performance of the index falls, say, 2% on any given day, the ETF will rise 2%.

The new fund is a way for investors to profit from the disruption in retail that is turning long-time winners into losers and transforming modern-day online retail powerhouses like Amazon.com and China-based Alibaba into retail juggernauts, a trend that the creators of the fund at ProShares expect to continue.

“The shift to online retailing is in the early innings,” says Simeon Hyman, head of investment strategy at ProShare Advisors.

Stock performance in 2017 shows that investors are already separating winners from losers amid the ongoing shift to online shopping. Amazon shares are up more than 50% this year, while the SPDR S&P Retail ETF (XRT), a broad retail ETF, is down nearly 6%.