As consumer confidence declines and inflation remains persistent, the U.S. retail market seems to be displaying an unexpected source of strength. U.S. holiday sales are on track to cross the $1 trillion mark for the first time, according to Bain & Company’s annual forecast, as quoted on CNBC.
Per the consultancy's forecast, sales are projected to grow 4.5% year over year, suggesting that consumer spending remains resilient despite macroeconomic headwinds. Around 70% of holiday sales are expected to come from in-store shopping, while e-commerce continues to expand its share. Still, the projected increase in headline spending is partly driven by inflation, according to Bain, suggesting that underlying unit growth will be considerably more modest.
As per the abovementioned CNBC article, higher tax refunds are providing an additional boost to holiday spending, rising $43 billion, or 17% year over year, and giving consumers more disposable cash.
Retail Market Outlook in Focus
Deloitte projects holiday retail sales to reach $1.7 trillion this year, while stating that consumers are becoming more creative with their spending. Shoppers are increasingly looking for discounts and markdowns as they seek to make their budgets go further.
As quoted on the CNBC article, as per Adobe’s holiday shopping report, value-focused shopping is expected to be a key driver of growth and market share this year, while buy now, pay later spending is projected to hit a record $21.3 billion as consumers become increasingly selective about where they spend.
Adobe also expects AI to play a growing role in product discovery and purchasing in the holiday season. Adobe reported that AI-driven traffic to retail sites jumped 127% year over year in August and expects it to rise 130% during the holiday season, with Thanksgiving traffic projected to grow 141%.
AI is increasingly reshaping the retail experience, from personalized product recommendations to more targeted pricing and promotions. By helping retailers identify consumer buying patterns, improve customer retention and deliver more tailored experiences, AI could provide another catalyst for retail sales growth.
Retail ETFs to Keep on the Radar
Below, we have highlighted a few retail funds for investors to consider amid the upbeat outlook for the U.S. retail market.
State Street SPDR S&P Retail ETF XRT
State Street SPDR S&P Retail ETF seeks to track the performance of the S&P Retail Select Industry Index with a basket of 74 securities. The fund has gathered an asset base of $441.3 million and charges an annual fee of 0.35%.
State Street SPDR S&P Retail ETF has a one-month average trading volume of about 3.28 million shares.
VanEck Retail ETF RTH
VanEck Retail ETF seeks to track the performance of the MVIS US Listed Retail 25 Index with a basket of 26 securities. The fund has gathered an asset base of $235.2 million and charges an annual fee of 0.35%.
VanEck Retail ETF has a one-month average trading volume of about 3,200 shares. The fund has an exposure of 96.9% to the United States.
Amplify Online Retail ETF IBUY
Amplify Online Retail ETF seeks to track the performance of EQM Online Retail Index with a basket of 83 securities. The fund has gathered an asset base of $120 million and charges an annual fee of 0.65%.
Amplify Online Retail ETF has a one-month average trading volume of about 12,000 shares. The fund has an exposure of 74.5% to the United States.
ProShares Online Retail ETF ONLN
ProShares Online Retail ETF seeks to track the performance of ProShares Online Retail Index with a basket of 24 securities. The fund has gathered an asset base of $56.1 million and charges an annual fee of 0.58%.
ProShares Online Retail ETF has a one-month average trading volume of about 5,500 shares. The fund has an exposure of 59.5% to the United States.
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State Street SPDR S&P Retail ETF (XRT): ETF Research Reports
VanEck Retail ETF (RTH): ETF Research Reports
Amplify Online Retail ETF (IBUY): ETF Research Reports
ProShares Online Retail ETF (ONLN): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).