Retail ETFs in Focus During Holiday Shopping Season

by on December 1, 2014

With one of the busiest retail weekend behind us, and with Cyber Monday in full swing, the retail industry continues to be in focus in December, as consumers prepare for the holidays. Analysts are quite optimistic about this year’s retail sales in December, and given just how much certain retailers rely on this season, we take a look at sales forecasts and highlight which ETFs investors should keep an eye on [see also Invest Like a Billionaire: Under the Hood of the IBLN ETF].

The ForecastHoliday Shopping Christmas

The National Retail Federation sees retail sales in November and December (excluding auto, gas, and restaurant sales) to grow 4.1% from last year, bringing total spending to an estimated $616.9 billion. 2013 saw a 3.1% increase during the same time frame. The NRF also believes that retail sales during these two months will account for approximately 19.2% of the retail industry’s annual sales. 

From an individual consumer perspective, the NRF estimates the average person celebrating Christmas, Kwanzaa, and/or Hanukkah will spend $804.42 on gifts this season. This is a 5% increase from 2013′s actual $767.27 average. 

Like last year, 2014 is expected to see even more growth in online retail sales, which are forecasted to increase 8% to 11%, totaling an estimated $105 billion. According to the NRF survey, the average person plans to do 44.4% of their shopping online, the highest percentage seen so far. 

Another key finding from the the NRF survey is that while sentiment has certainly improved in recent years, consumers will still be looking to take advantage of sales and discounts, focusing on both price and value.

ETFs to Watch

For those looking to make a play on the biggest shopping season of the year, we outline four retail ETF options that could see some high levels of activity in the next few weeks.


State Street’s XRT is by far the largest and most popular retail ETF, with an average daily trading volume of over 2 million shares. XRT invests in just over 100 retailers, with sub-industries given the following allocations: apparel (24%), specialty stores (17%), automotive retail (14%), and internet retail (11%).

XRT’s top holdings are Tractor Supply Co (TSCO), Casey’s General Stores Inc (CASY), and O’Reilly Automotive Inc (ORLY). It’s also important to note that no single security receives an allocation of more than 1..5%.

Market Vectors Retail ETF (RTH)

Van Eck’s RTH holds a portfolio of only the 25 largest U.S. listed retail companies, making it more concentrated than XRT. RTH, however, offers significantly more exposure to retailers that benefit most from the holiday shopping season.

Its top holdings include Wal-Mart Stores Inc (WMT), Inc (AMZN), Home Depot Inc (HD), CVS Health Corp (CVS), and Lowe’s Companies Inc (LOW). Other retailers include TJX Companies (TJX) and Target Corp (TGT).

PowerShares Dynamic Retail Portfolio (PMR)

This ETF is part of the PowerShares lineup of “intelligent” ETFs linked to benchmarks that use quantitative analysis in an attempt to outperform traditional cap-weighted indexes. PMR’s resulting portfolio consists of roughly 30 retailers with allocations to the following sectors: food (19%), apparel (18%), hypermarkets and super centers (13%), drug retail (12%), and automotive retail (10%).

The fund’s top holdings include O’Reilly Automotive Inc (ORLY), Costco Wholesale Corp (COST), and Kroger Co (KR).

Direxion Daily Retail Bull 3X Shares (RETL)

For a bullish play, RETL offers 3x exposure to the Russell 1000 Retail Index. The underlying index offers exposure to multiple sub-sectors, including home improvement (20%), hypermarkets and super centers (20%), internet retail (17%), and apparel (12%).

RETL’s underlying index’s top holdings include Home Depot Inc (HD), Wal-Mart Stores Inc (WMT), Inc (AMZN), Costco Wholesale Corp (COST), and Lowe’s Companies Inc (LOW).

Follow me on Twitter @DPylypczak

Disclosure: No positions at time of writing.