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Grab Retail ETFs on Upbeat Holiday Sales Forecast

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Investors searching for attractive opportunities to park their money to rake in good returns can zero in on the retail sector. Market pundits are anticipating an impressive retail sales figure in 2021, along with a strong holiday season. The strength in consumer sentiment can be the major driving force as the same is believed to be prepared with enough resources to splurge this holiday season after facing restrictions for more than a year.

Retailers are also strongly gearing up for the start to the holiday season (the late October-December period) that is considered a busy season for many industry players and market participants. The quarter is also marked by some popular retail events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas, which increase its significance among retailers.

According to the National Retail Federation (“NRF”), holiday season sales in 2021 are projected to surpass all existing records during November and December and surge 8.5-10.5% year over year to between $843.4 billion and $859 billion. Holiday sales increased 8.2% in 2020 to hit a record of $770 billion.

Commenting on the forecast, NRF President and CEO Matthew Sha, has reportedly said that “There is considerable momentum heading into the holiday shopping season. Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger. Retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet this time of exceptional consumer demand.”

Also, studying Mastercard SpendingPulse data,  U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” spanning from Oct 11 to Dec 24 are anticipated to increase 6.8% from the year-earlier tally.

Considering a Deloitte’s annual holiday sales forecast, retail sales for the holiday season are projected to rise between 7% and 9% this year, per a prnewswire article. The retail sales figure is predicted to fall in the $1.28-$1.3 trillion range during the November-January period.

Retailers are hiring rapidly to cash in on the optimistic holiday shopping season sales. According to the NRF, retailers are expected to hire between 500,000 and 665,000 seasonal workers compared to 486,000 hired in 2020.

The pandemic has been a blessing in disguise for the e-commerce industry to date as people continue to practice social distancing and shopping online for all essentials, especially food items. Thus, on par with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. The NRF projects online and other non-store sales surge of 11% to 15% to reach between $218.3 billion and $226 billion compared to $196.7 billion in 2020. Mastercard SpendingPulse predicts online sales to increase 7.5% during the “75 Days of Christmas” phase.

Surprisingly, consumer confidence in the United States rose in October primarily on the heels of easing Delta variant concerns, improving labor market conditions, rebounding U.S. economy from the pandemic-led slump and accelerated coronavirus vaccine rollouts. The Conference Board's measure of consumer confidence index stands at 113.8 in comparison to 109.8 in September. The metric has finally broken the streak of three consecutive monthly declines. October’s reading also beat the consensus estimate of the metric, coming in at 108.3, per a Reuters’ poll. The metric continues to be below the pre-pandemic level of 132.6 in February 2020.

Consumers seem to be looking forward to buying homes, motor vehicles and major household durables. In fact, the buying attitude for vehicles and homes is expanding. The survey also showed that the proportion of the population planning to go on vacation has shot up to the highest level since February 2020, as mentioned in a Reuters article.

Retail ETFs to Consider

Considering the strong trends, investors may want to park their money in the following retail ETFs to tap the sales boom. We present those below:

Amplify Online Retail ETF (IBUY - Free Report)

This ETF attracted $896.7 million to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 71 stocks, each accounting for less than 2.97% of its assets. IBUY charges 65 bps in annual fees (read: 4 ETF Areas for Investors to Make the Most of Q4).

ProShares Online Retail ETF (ONLN - Free Report)

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 25 stocks in its basket. ONLN accumulated $853.8 million in its asset base and charges 58 bps in annual fees (read: ETFs in Focus Post Dismal Amazon Q3 Results).

SPDR S&P Retail ETF (XRT - Free Report)

With AUM of $862.30 million, this product tracks the S&P Retail Select Industry Index, holding 107 securities in its basket with each accounting for not more than 1.3% of assets. Internet & direct marketing retail, apparel retail, automotive retail and specialty stores are the top four sectors with a double-digit allocation each. The fund charges 35 bps in annual fees (read:  4 Sector ETFs & Stocks to Win on Upbeat September Retail Sales ).

VanEck Retail ETF (RTH - Free Report)

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It is highly concentrated on the top three firms with a combined 39.9% share. The product amassed $218.5 million in its asset base and charges 35 bps in annual fees.