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Despite high inflation and recessionary fears, the holiday season saw a gala start with consumers returning to stores to snap up bargains, and in some places, even “doorbusters” were back in fashion. The trend is likely to continue during Christmas, given strong consumer spending and rising wages.

While several ETFs are poised for solid gains from this trend, SPDR S&P Retail ETF (XRT - Free Report), VanEck Retail ETF (RTH - Free Report), Amplify Online Retail ETF (IBUY - Free Report), ProShares Online Retail ETF (ONLN - Free Report) and Global X E-commerce ETF (EBIZ - Free Report) look to benefit the most from the annual shopping event.

Solid Holiday Trends

Holiday spending is expected to be healthy even with recent inflationary challenges. The National Retail Federation expects holiday sales to grow 6-8% in November and December to $942.6-$960.4 billion, potentially making this season the third-best year in the past 20 years, following 2020 and 2021. Last year, holiday sales grew 13.5% year over year to $889.3 billion, shattering previous records. Holiday retail sales have averaged an increase of 4.9% over the past 10 years.

Online and other non-store sales are likely to increase 10-12% to $262.8-$267.6 billion. This is up from $238.9 billion last year. While e-commerce will remain the hot spot, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience.

Meanwhile, Adobe sees online holiday sales growing 2.75% from last year to $210.1 billion. Cyber Week (the shopping period including Thanksgiving, Black Friday and Cyber Monday) drove $35.3 billion in online spending thanks to heavy discount categories, including toys, electronics, computers, televisions and apparel. This represents a 4% increase from last year. Consumers spent a record $11.3 billion on Cyber Monday (up 5.8% year over year), $9.12 billion on Black Friday (up 2.3%) and $5.29 billion on Thanksgiving (up 2.9%) as consumer uptake of big discounts across numerous categories. Consumers have already spent $107.7 billion online through Nov 28, up 8.7% year over year (read: 5 ETFs to Splurge on Cyber Monday Record Sales).

Forrester expects U.S. online holiday retail sales to grow by 14.6% year over year to reach $230 billion in 2022.

The two major contributors to solid retail sales this year are excess savings and reliance on credit cards. In an October report, the Federal Reserve stated that U.S. households are still holding onto a sizeable chunk of their pandemic savings. At the peak, Americans were saving as much as 33% of their disposable income.

In the third quarter, credit card balances surged 15% year over year, the largest annual jump since the New York Fed began keeping track of this data. More than 190 million Americans have at least one credit card, while half of all American adults have at least two. Some 13% have five or more, the New York Fed says.

SPDR S&P Retail ETF (XRT)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 97 stocks in its basket, with none making up for more than 1.7% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in apparel retail, specialty stores, automotive retail, and Internet & direct marketing retail.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $633.8 million and an average trading volume of 4.5 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

VanEck Vectors Retail ETF (RTH)

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. VanEck Vectors Retail ETF is highly concentrated on the top two firms with double-digit exposure, while the other firms hold no more than 18.5% share.

VanEck Vectors Retail ETF has amassed $158 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 12,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #2 with a Medium risk outlook.

Amplify Online Retail ETF (IBUY)

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 58 stocks in its basket, with none accounting for more than 3.1% of assets. Amplify Online Retail ETF has the largest allocation in marketplace at 45% and traditional retail at 44%.

Amplify Online Retail ETF has attracted $204.5 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 31,000 shares.

ProShares Online Retail ETF (ONLN)

ProShares Online Retail ETF offers exposure to the company that principally sells online or through other non-store channels, and then zeros in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 25 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.3% of assets. American firms make up 69.6% of the portfolio, while Chinese firms account for 21.2% share.

ProShares Online Retail ETF has accumulated $129.3 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 112,000 shares.

Global X E-commerce ETF (EBIZ)

Global X E-commerce ETF invests in companies positioned to benefit from the increased adoption of e-commerce as a distribution model, including companies whose principal business is in operating e-commerce platforms, providing related software and services, and/or selling goods and services online. It follows the Solactive E-commerce Index, holding 40 stocks in its basket.

Global X E-commerce ETF has accumulated $48.3 million in its asset base and charges 50 bps in annual fees. The ETF sees an average daily volume of 11,000 shares.

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