The ETF Lyxor RTA (Distribution Europe) created in 08/2006 is listed in Euro on Euronext and seeks to replicate the STOXX600 Retail index (SXRR) which is composed of the main European distribution stocks of which approximately one third are English.
The costs of this ETF are 0.3% and the AUM approximately 22M €. Replication is indirect (via a swap) and there is a dividend capitalization policy. RTA is eligible for PEA.
Alternative ETFs: EXH8 (iShares in Euro), SC05 (Powershares in Euro)
Latest developments
The sector returned -1% in 2017 after a -5.8% drop in 2016, a much lower performance than stoxx600NR.
In 2018 the trend reversed and the index gained + 7.6%, which is significantly higher than the stoxx600NR (+ 3.3%). This is the result of the exceptional performance of Kering (+ 31.4%), the reversal of Tesco (+ 18.9%) and the good behavior of Ahold (+ 9.6%). At the same time, Inditex is starting to turn around after several quarters of consolidation, in the wake of a change in its distribution model.
The industry continues its transition toward a web-based distribution / physical distribution mix and is gradually adapting to Amazon's global price competition. The economic recovery in Europe is also helping the sector to regain momentum on volumes.
Index & components
This index is rather concentrated since it has only 27 holdings.
The index is essentially composed of large market capitalizations, with Kering in the first plalce (15.7% of the index capitalization) and Inditex accounting for 13.3% of the index and weighing nearly € 80bn in capitalization.
The value of this index is its diversification from a business point of view, as it is composed of distribution stocks with a strong food component, ie hypermarkets (Tesco, Carrefour, Ahold, Casino, etc.) which are usually defensive but which are also overall looking for some new business models based on e-commerce or refocusing on their domestic markets, because of difficult emerging markets and sometimes excessive indebtedness. Other companies such as Inditex, Next, Hennes & Mauritz or Kering are more closely linked to fashion and textile / ready-to-wear distribution, which essentially makes them growth stocks, while we will also find in this index companies such as Kingfisher who are distributors specializing in construction with an essentially cyclical business model.
All in all, this makes it a varied index with moderate volatility, while Inditex is historically a pole of stability due to its weight and growth momentum. The industry faces many challenges, including the one posed by e-commerce players (Amazon in the first place) that crush prices and change the customer relationship by redefining the supply chain and offering new services.
The strategic trend is for the combination of physical networks and e-commerce platforms, so we see Carrefour reiterate its ambitions for expansion in e-commerce in the wake of Walmart in the US while Amazon makes acquisitions in the goal of acquiring a physical network in the United States coupled with ambitions in Europe. Consolidation movements are expected, while bankruptcies could also occur like Toys'r us last year in the United States.
