$1 Trillion Holiday Season Sales Haul: ETFs to Gain Momentum

As the holiday season approaches, the retail sector transforms into a powerful engine for the U.S. stock market. This period traditionally fuels significant revenue surges for companies ranging from e-commerce giants like Amazon (AMZN) to warehouse retailers such as Costco (COST) and Walmart (WMT), all of which witness an increased investor interest in holiday times.

This year, the stakes are exceptionally high, with the National Retail Federation (NRF) projecting retail sales during Nov. 1 to Dec. 31 to surpass a staggering $1 trillion. This massive influx of spending presents a compelling opportunity for investors looking to capitalize on the seasonal uplift.

However, instead of taking a risky bet on a single company, an Exchange-Traded Fund (ETF) that holds a basket of these retail stocks could be a smarter and more diversified path to potential gains.

Before mentioning the handful of ETFs one might consider keeping on their watchlist as potential investment options, let’s take a closer look at how the aforementioned companies performed during past holiday periods and are expected to perform this year, so investors can make more informed decisions.

Holiday Season Performance: Then and Now

Historically, leading retailers have performed exceptionally well during the holiday season, delivering notable gains for investors. For instance, in 2024, Amazon announced that its Black Friday Week and Cyber Monday holiday shopping event, from Nov. 21 through Dec. 2, witnessed record sales and a record number of items sold. This also marked its biggest event ever compared to the same 12-day period ending on Cyber Monday in the previous years.

On the other hand, Walmart, with its massive network and omnichannel approach, racks up millions of transactions, while Costco continues to see a surge in food and gift sales. Evidently, online sales for Walmart jumped 20% year over year for the Nov. 2–Dec. 26, 2024 period. Meanwhile, Costco reported 7.5% sales growth for the twelve weeks ending Nov. 24, 2024.

Other prominent e-commerce platforms like Shopify (SHOP) also logged record sales growth in last year’s holiday season. Shopify merchants generated a record-breaking sale of $11.5 billion over the Black Friday-Cyber Monday (BFCM) weekend — registering a solid 24% increase from last year with strong sales momentum leading up to the weekend.

Expectations are high again this year, buoyed by positive October numbers and the National Retail Federation’s multi-trillion dollar forecast. Given these trends, this holiday shopping boom could present a lucrative entry point for investors.

Why ETFs Might Be the Smarter Move?

While the holiday season is a boon for the retail sector, investing in single stocks carries inherent risks. A poor product assortment, supply-chain misstep, or weaker-than-expected sales report can cause a single stock to plunge, even if the overall market is up.

For example, multinational retailer- Target (TGT) has recently faced challenges with shifting consumer demand and inventory management, causing volatility. A direct investment could expose an investor to these single-company headwinds.

This is where ETFs shine. By investing in these funds, one can gain diversified exposure to the sector's projected $1 trillion success. The diversification mitigates the risk that a slump in one stock, due to company-specific issues, will wipe out your gains. This is a strategic approach to ride the holiday wave while safeguarding your investment.

An investor keen on profiting from the massive holiday sales surge may thus want to explore the following ETFs, with strong exposure to the industry's leaders.

VanEck Retail ETF (RTH)

This fund, with net assets worth $256.76 million, provides exposure to 25 of the world’s largest and most traded retailers. Its top three holdings include Amazon (21.07%), Walmart (9.32%), and Costco (7.65%).

RTH has gained 13.2% year to date. The fund charges 35 basis points (bps) as fees.

Global X E-commerce ETF (EBIZ)

This fund, with net assets worth $55.98 million, offers exposure to 41 companies whose primary business involves operating E-commerce platforms, providing E-commerce software and services, and/or selling goods and services online. Its top 10 holdings include Shopify (5.12%) and Amazon (4.07%).

EBIZ has surged 21.7% year to date. The fund charges 50 bps as fees.

Vanguard Consumer Staples ETF (VDC)

This fund, with net assets worth $7 billion, offers exposure to 106 consumer staple stocks such as manufacturers and distributors of food, beverages, and tobacco, as well as producers of nondurable household goods and personal products. Its top three holdings include Walmart (14.11%), and Costco (12.78%).

VDC has risen 0.3% year to date. The fund charges 9 bps as fees.

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This article originally published on Zacks Investment Research (zacks.com).

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