With the economy regaining momentum after a pandemic slowdown, the holiday season looks bright this year despite the supply chain issues and labor shortages. This is especially true as rising household income and high saving rates have pushed consumers’ spending power higher that has the potential to shatter previous records.
While several ETFs are poised for solid gains from this trend, SPDR S&P Retail ETF ( XRT Quick Quote XRT - Free Report) , VanEck Retail ETF ( RTH Quick Quote RTH - Free Report) , Amplify Online Retail ETF ( IBUY Quick Quote IBUY - Free Report) , ProShares Online Retail ETF ( ONLN Quick Quote ONLN - Free Report) and Global X E-commerce ETF ( EBIZ Quick Quote EBIZ - Free Report) look to benefit the most from the annual shopping event (read: Retail ETFs in Focus Ahead of Big-Box Q3 Earnings). Solid Holiday Trends
The National Retail Federation expects holiday sales to grow 8.5-10.5% in November and December to $843.4-$859 billion. This is higher than last year’s growth of 8.2% and the five-year average of 4.4%. Of these, online and other non-store sales are likely to increase 11-15% to $218.3-$226.2 billion, up from $196.7 billion last year.
Consumers plan to spend an average of $997.73 this year, up from $997 from last year but below the pre-pandemic high of $1,047.83 in 2019. While ecommerce will remain important, households are expected to shift back to in-store shopping and a more traditional holiday shopping experience. The lion’s share of spending will go toward gifts at $648 (down $2 from 2020), followed by $231 for non-gift holiday items such as food, candy, decorations and cards (up $1 from 2020) and $118 for other non-gift purchases (up $1 from 2020). Other forecasters such as Bain, Deloitte, and Mastercard SpendingPulse also predicts a significant jump in year-over-year spending. Sales in November and December are expected to grow at least 7% compared with last year. eMarketer forecasts that holiday retail sales in 2021 will see the strongest growth in more than 20 years, rising 9.0% from last year to $1.147 trillion. This is the fastest growth rate since 1999 when sales rose 10.2% for the November to December period. Apparel and accessories will be the top product category, which will increase 16.2% overall and 25.5% online (read: 4 Sector ETFs & Stocks to Win on Upbeat September Retail Sales). Ecommerce sales will likely grow 14.4%, reaching $211.66 billion in sales and make up for 18.4% of this year’s U.S. holiday sales, up from 17.6% in 2020. Last-minute shoppers can continue shopping online thanks to click and collect, which has only grown in prominence this year. For the week leading up to Christmas, click and collect will likely play a huge role in driving additional sales gains. Meanwhile, Adobe sees holiday online sales to grow 10% from last year to a record $207 billion in the United States. Globally, online spending is expected to hit $910 billion, up 11% year over year. Shoppers are expected to spend $36 billion through e-commerce during Cyber Week (from Thanksgiving to Cyber Monday), which represents just 17% of the total shopping done during the holiday season. SPDR S&P Retail ETF SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large-, mid-and small-cap stocks. XRT holds well-diversified 107 stocks in its basket with none making up for more than 1.6% share. Additionally, SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in Internet & direct marketing retail, apparel retail, automotive retail and specialty stores. SPDR S&P Retail ETF is the largest and most popular in the retail space with AUM of $1.2 billion and an average trading volume of 2.7 million shares. XRT charges 35 bps in annual fees and has shed 1.4% in a week. SPDR S&P Retail ETF has a Zacks ETF Rank #1 with a Medium risk outlook. VanEck Vectors Retail ETF VanEck Vectors Retail ETF provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. RTH is highly concentrated on the top two firms with double-digit exposure each while the other firms hold no more than 5.6% share. VanEck Vectors Retail ETF has amassed $222.8 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 19,000 shares a day on average. The fund RTH has a Zacks ETF Rank #2 with a Medium risk outlook. Amplify Online Retail ETF Amplify Online Retail ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. IBUY holds 79 stocks in its basket with none accounting for more than 2.5% of assets. Amplify Online Retail ETF has largest allocation in traditional retail at 53.6% followed by 36.6% in marketplace. Amplify Online Retail ETF has attracted $885.3 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 57,000 shares (read: 4 ETF Areas for Investors to Make the Most of Q4). ProShares Online Retail ETF ProShares Online Retail ETF offers exposure to the company that principally sell online or through other non-store channels, and then zeroing in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 40 stocks in its basket. ONLN is highly concentrated on the top two firms while other firms hold no more than 4.3% of assets. American firms make up three-fourth of the portfolio, while Chinese firms accounts for 17.4% share. ProShares Online Retail ETF has accumulated $866.4 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 57,000 shares. Global X E-commerce ETF Global X E-commerce ETF invests in 40 companies positioned to benefit from the increased adoption of e-commerce as a distribution model, including companies with their principal business in operating e-commerce platforms, providing related software and services, and/or selling goods and services online. It tracks the Solactive E-commerce Index and none of the firms in its portfolio accounts for more than 6.4% of assets. EBIZ has key holdings in Internet retail at 40.4% while Internet software/services and other consumer services round off the next two with double-digit exposure. About 57.4% of the portfolio is dominated by American firms, followed by 22.7% in China. Global X E-commerce ETF has accumulated $198.3 million in its asset base and charges 50 bps in annual fees. EBIZ trades in a paltry volume of 19,000 shares a day on average.