Although Energy has received much of the headlines over the last year, bricks and mortar retail has been embroiled in a bear market of its own that is only just recently starting to come up to the surface.  The chart below shows the performance of the 33 stocks that make up the S&P 500 Retailing Industry Group over the last year.  In order to show how each individual component has been driving the performance of the group, the bubbles for each stock represent the market cap of each component, so that large bubbles indicate a large weighting in the index while small bubbles represent companies that have less ‘clout’ in the performance of the group.

As we have pointed out repeatedly in the last several months, the performance of Amazon (AMZN) has masked a lot of the overall weakness within the group.  With a market cap of $332 billion, AMZN represents 31% of the entire group’s market cap.  In other words, as goes AMZN, so goes the rest of the group, and with the stock trading up 63% in the last year, that has helped the index’s overall performance.  The next best-performing component of the S&P 500 Retail Industry Group is Ulta Salon (ULTA), which has rallied 37%, but because its market cap is just $13 billion it has barely had an impact on the overall performance of the group.  Number three on the list of the group’s top performers is Home Depot (HD), which has rallied nearly 18%.  As shown in the chart, HD is another stock with a large weighting in the group (second largest in the group).  In fact, with AMZN, those two stocks account for 46% of the entire group’s market cap.  As long as these two stalwarts can continue their run, the performance of the group should hold up well.

At the other end of the spectrum, the list of worst performers reads like a who’s who of stores that are present in shopping malls across the country.  Macy’s (M) and Nordstrom’s (JWN) have always been considered anchor tenants of successful shopping malls across the country, and both stocks are down over 40% in the last year.  Looking at how the names in this chart are grouped, names towards the right (worst performers) are all companies whose goods can be easily shipped and shopped for online, while names towards the left have little physical presence or sell services or goods that generally aren’t purchased online.



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