Trading Nation

The tale of the two kinds of retailers

Investors look to retail for growth

2015 has been the best of times and the worst of times for retail stocks. It just depends on what kind of retail stocks we're talking about.

The S&P 500 Internet and catalog retail industry, host to hot names such as Amazon, Netflix and Expedia, is up 58 percent on the year. Meanwhile, the multi-line retail group, home to beleaguered names like Nordstrom and Kohl's, is up a mere 3 percent.

The latest bad news for that set of stocks came on Wednesday morning, when Macy's reported earnings and revenue that dropped from last year. The retail giant attributed that partly to unfortunate macro factors.

"Throughout the first half of the year, overall consumer demand has been restrained in many of the categories of merchandise we sell, and the strong U.S. dollar has led to significantly lower international tourist spending," Macy's CEO Terry Lundgren said in the earnings release.

Read MoreEarnings miss 'a tough one': Macy's CEO

Apparently, those same factors have not been felt by companies like Amazon. The company's sales are up 20 percent versus the same period last year. Meanwhile, Macy's reported that revenue has fallen 3 percent.

"Retail is actually looking quite good, and when you really delve down into it, the driver of all of it is really in Internet retail," chief equity investment officer Erin Gibbs of S&P Capital IQ said Tuesday on CNBC's "Trading Nation."

Gibbs reports that Internet retail companies are expected to grow almost 50 percent in 2016. Multi-line retail companies are also expected to grow about 12 percent, she said.

Unsurprisingly, this expected growth comes at a price. Internet retail companies are trading at quadruple the forward earnings multiples of department stores like Macy's.

Fellow multi-liners Kohl's and Nordstrom are also expected to report earnings on Thursday.

Options trader Stacey Gilbert of Susquehanna International Group said investors are putting on bearish bets ahead of retailers reporting earnings, according to increased activity in buying August put options of the SPDR S&P retail ETF (XRT).

"This is actually what we would label a more aggressive, cautious, bearish tone here," Gilbert said Tuesday. "Investors are somewhat nervous into the next two weeks of earnings."

However, Gilbert said several specific companies, such as Staples, are seeing long-term bullish bets.

"We're not seeing investors rush into any one sector, retail or anywhere else. They're kind of picking their names they like and positioning likewise," she said.

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