GameStop slump and weak February sales data are pressuring a major retail ETF

• GameStop on Tuesday was on course for a second straight loss, down as much as 20% during the session.
• The video game retailer is the largest holding in the SPDR S&P Retail ETF.
• The ETF was down after February retail sales fell by more than expected, with poor weather a big factor.

GameStop shares fell by more than 20% during Tuesday's session. The move lower came alongside a slump in monthly US retail sales and putting pressure on a widely watched retail exchange-traded fund.

GameStop shares were on track for a second straight loss, though shares staged a recovery in the afternoon following a steep decline in early trading. The stock fell by as much as 22% to an intraday low of $172.35.

The video game seller was down alongside other retail stocks after the Commerce Department said early Tuesday retail sales fell by 3% in February. That result was worse than the 0.5% decline expected in a Bloomberg survey of economists.

GameStop is the top holding in the SPDR S&P Retail ETF with a weighting of about 12.4% as of Monday. The ETF, which had about $855 million in assets under management, on Tuesday fell as much as 3.6% to 90.08 before trimming the loss of 2.3%. Among the ETF's other holdings, Signet Jewelers fell 1.2%, Kohl's sagged by 2.5% and Rent-A-Center fell 4.1%. Best Buy, meanwhile, edged up 0.2%.

Sales in the electronics and appliances category in February fell by 1.9% month-over-month and on a seasonally adjusted basis. But analysts largely pointed to poor weather as a key reason that February retail sales declined. The loss also came after an upwardly revised increase in January sales.

The US government last week starting sending stimulus checks of $1,400 to most Americans as part of its coronavirus-relief package. That money "will lift disposable income by roughly 25% month-over-month in March, creating a massive tailwind for consumer demand," Aneta Markowska, chief economist at Jefferies, in a note Tuesday.

Other analysts have said GameStop should benefit from customers having extra funds for discretionary items.

GameStop, the darling of retail investors active on Reddit's Wall Street Bets community, earlier this month said Ryan Cohen will be in charge of a new committee aimed at driving a turnaround plan.

Cohen is the cofounder of pet products retailer Chewy and GameStop's largest individual shareholder.