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4 ETF Areas & Stocks to Win on Upbeat December Retail Sales
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In December, holiday shopping topped expectations, contributing to a strong finish for the year 2023, according to the Commerce Department's report released on Wednesday. Retail sales for the month increased by 0.6%, outperforming the Dow Jones estimate of 0.4%, as quoted on CNBC.
This boost was driven by heightened activity in clothing and accessory stores as well as online non-store businesses. When excluding auto sales, there was still a notable 0.4% increase, surpassing the estimated 0.2% rise.
On a year-over-year basis, retail sales for 2023 showed a substantial increase of 5.6%. Notably, these figures are not adjusted for inflation, indicating that consumers are keeping pace with an annual inflation rate of 3.4% as measured by the consumer price index (CPI). The CPI increased by 0.3% in December, which is lower than the retail sales increase.
Consumer Resilience in Place
These results have sparked discussion about the robustness of the U.S. economy as it transitions into the new year, which is anticipated to bring slower growth. The resilience of consumers could indicate continued momentum and potentially influence the Federal Reserve's approach to interest rates.
The release of the report triggered apprehension among investors, as solid retail sales could lead the Fed to keep rates higher for longer.
Caution on Strong December Numbers
Bank of America economists cautioned that the robust December numbers may have been influenced by a significant shift in seasonal factors. This shift could potentially be offset when the January data is released, as quoted on CNBC.
Below we highlight a few areas and the related ETFs & stocks that may benefit handsomely from the retail sales.
Winning Areas
Non-Store Retailers
Sales at non-store retailers rose 9.7% year over year in December following same increase in November. On a sequential basis, sales gained 1.5% in December 2024, after a 1.2% uptick in November 2024.
The underlying index of the fund utilizes a rule-based methodology to select a globally diversified group of companies with 70% or more sales coming online and virtually. The fund charges 65 bps in fees.
Amazon.com is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. The stock has a Zacks Rank #2 (Buy).
General Merchandise & Grocery Stores
General merchandise stores see a year-over-year sales increase of 3.3% while sales in this category rose 1.3% month over month. Meanwhile, department stores’ sales fell 2.7% year over year but gained 3% sequentially.
Consumer Staples Select Sector SPDR ETF (XLP - Free Report) – The Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. The fund charges 10 bps in fees. The fund has a Zacks Rank #3 (Hold) at present.
Walmart (WMT - Free Report) – The Zacks Rank #3 company has evolved from a traditional brick-and-mortar retailer to an omnichannel player.
Clothing
Sales in this segment increased 4.3% year over year and 1.5% sequentially.
SPDR S&P Retail ETF (XRT - Free Report) – The S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The fund, which invests about 20% in clothing stocks, charges 35 bps in fees.
American Eagle Outfitters (AEO - Free Report) – The Zacks Rank #2 (Buy) company is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15–25 years.
Motor Vehicle & Parts Dealers
Sales of this category gained 1.1% sequentially in December and rose 10.3% year over year.
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) follows the S-Network Electric & Future Vehicle Ecosystem Index. Constituents are chosen by selecting the eligible Pure-Play companies in descending order of float-adjusted market capitalization until 100 constituents have been selected.
Group 1 Automotive Inc. (GPI - Free Report) is one of the leading automotive retailers in the world, with operations primarily located in the United States and the UK. The stock presently has a Zacks Rank #3.
Food and Drink Places
Sales at restaurants and bars increased 11.1% year over year while sales remained unchanged sequentially.
The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business. The fund charges 101 bps in fees.
Carrols Restaurant Group is the largest BURGER KING franchisee in the U.S., with over 800 restaurants and has operated BURGER KING restaurants since 1976. The fund has a Zacks Rank #1.
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4 ETF Areas & Stocks to Win on Upbeat December Retail Sales
In December, holiday shopping topped expectations, contributing to a strong finish for the year 2023, according to the Commerce Department's report released on Wednesday. Retail sales for the month increased by 0.6%, outperforming the Dow Jones estimate of 0.4%, as quoted on CNBC.
This boost was driven by heightened activity in clothing and accessory stores as well as online non-store businesses. When excluding auto sales, there was still a notable 0.4% increase, surpassing the estimated 0.2% rise.
On a year-over-year basis, retail sales for 2023 showed a substantial increase of 5.6%. Notably, these figures are not adjusted for inflation, indicating that consumers are keeping pace with an annual inflation rate of 3.4% as measured by the consumer price index (CPI). The CPI increased by 0.3% in December, which is lower than the retail sales increase.
Consumer Resilience in Place
These results have sparked discussion about the robustness of the U.S. economy as it transitions into the new year, which is anticipated to bring slower growth. The resilience of consumers could indicate continued momentum and potentially influence the Federal Reserve's approach to interest rates.
The release of the report triggered apprehension among investors, as solid retail sales could lead the Fed to keep rates higher for longer.
Caution on Strong December Numbers
Bank of America economists cautioned that the robust December numbers may have been influenced by a significant shift in seasonal factors. This shift could potentially be offset when the January data is released, as quoted on CNBC.
Below we highlight a few areas and the related ETFs & stocks that may benefit handsomely from the retail sales.
Winning Areas
Non-Store Retailers
Sales at non-store retailers rose 9.7% year over year in December following same increase in November. On a sequential basis, sales gained 1.5% in December 2024, after a 1.2% uptick in November 2024.
Amplify Online Retail ETF (IBUY - Free Report)
The underlying index of the fund utilizes a rule-based methodology to select a globally diversified group of companies with 70% or more sales coming online and virtually. The fund charges 65 bps in fees.
Amazon.com (AMZN - Free Report)
Amazon.com is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. The stock has a Zacks Rank #2 (Buy).
General Merchandise & Grocery Stores
General merchandise stores see a year-over-year sales increase of 3.3% while sales in this category rose 1.3% month over month. Meanwhile, department stores’ sales fell 2.7% year over year but gained 3% sequentially.
Consumer Staples Select Sector SPDR ETF (XLP - Free Report) – The Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. The fund charges 10 bps in fees. The fund has a Zacks Rank #3 (Hold) at present.
Walmart (WMT - Free Report) – The Zacks Rank #3 company has evolved from a traditional brick-and-mortar retailer to an omnichannel player.
Clothing
Sales in this segment increased 4.3% year over year and 1.5% sequentially.
SPDR S&P Retail ETF (XRT - Free Report) – The S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The fund, which invests about 20% in clothing stocks, charges 35 bps in fees.
American Eagle Outfitters (AEO - Free Report) – The Zacks Rank #2 (Buy) company is a specialty retailer of casual apparel, accessories and footwear for men and women aged 15–25 years.
Motor Vehicle & Parts Dealers
Sales of this category gained 1.1% sequentially in December and rose 10.3% year over year.
First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) follows the S-Network Electric & Future Vehicle Ecosystem Index. Constituents are chosen by selecting the eligible Pure-Play companies in descending order of float-adjusted market capitalization until 100 constituents have been selected.
Group 1 Automotive Inc. (GPI - Free Report) is one of the leading automotive retailers in the world, with operations primarily located in the United States and the UK. The stock presently has a Zacks Rank #3.
Food and Drink Places
Sales at restaurants and bars increased 11.1% year over year while sales remained unchanged sequentially.
AdvisorShares Restaurant ETF (EATZ - Free Report)
The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business. The fund charges 101 bps in fees.
Carrols Restaurant Group (TAST - Free Report)
Carrols Restaurant Group is the largest BURGER KING franchisee in the U.S., with over 800 restaurants and has operated BURGER KING restaurants since 1976. The fund has a Zacks Rank #1.