Shoppers might have gotten their holiday bargains a little too early this season, and ETF investors are paying attention.
A new report from Placer.ai reveals that pre-October sales promotions did not bring the holiday foot traffic that stores had anticipated. Walmart Inc (NYSE: WMT), Target Corp (NYSE:TGT), and Kohl’s Corp (NYSE:KSS) all launched holiday campaigns several weeks ahead of the season, but all but Best Buy Co (NYSE:BBY) experienced lower visits compared to last year. That lukewarm reception sets the stage for a problematic situation for retail ETFs entering the 2025 holiday season, one characterized by inflation weariness, tariff concerns, and growing consumer bifurcation.
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Retail ETFs Encounter A Divided Holiday Season
The SPDR S&P Retail ETF (NYSE:XRT), which holds an equal-weighted portfolio of retail stocks, captures a lot of this bifurcation. At one extreme, frugal shoppers are pinching pennies, considering “wants versus needs.” That would strain big-box and discount chains, the staple of XRT’s holdings.
Meanwhile, wealthier consumers continue to splurge on beauty and luxury, providing a tailwind to ETFs such as the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), which have a greater weighting in companies like Amazon.com Inc. (NASDAQ:AMZN), Home Depot Inc. (NYSE:HD), and luxury brands. According to data on Etfdb.com, over the past month, XLY has seen inflows of more than $133 million. XRT, on the other hand, has lost $344.13 million over the past 30 days.
More and more, the holidays are starting to resemble a story of two shoppers, Placer.ai observed, commenting that retailers dependent on mass-market promotions are likely to experience slimmer margins unless they shift toward precise, data-backed campaigns.
Beauty And Electronics Provide Bright Spots
The Placer.ai data indicates strength in beauty and electronics sectors, which may support ETFs with exposure to Ulta Beauty Inc. (NASDAQ:ULTA), Estée Lauder Companies Inc. (NYSE:EL), or Best Buy. The iShares U.S. Consumer Goods ETF (NYSE:IYK) and VanEck Semiconductor ETF (NASDAQ:SMH) may indirectly benefit if electronics and AI-enabled gadgets drive end-of-season demand, although flow data over the past month suggest that these ETFs have yet to attract meaningful investor interest.
The conflicting signals have investors torn between tactical and defensive positioning. Whether early discounts become late profits remains to be determined. Still, for ETF investors, the winners this holiday season could be a matter of who shops smarter: consumers or fund managers.
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