Retail bellwether Wal-Mart (NYSE: WMT) cut its forecast for the second time since August, revealing potential weakness in retail sector exchange traded funds ahead of the holiday rush.

Wal-Mart now projects profits per share in the year ending January 2014 will be $5.11 to $5.21, compared to analysts’ average estimate of $5.19, reports Renee Dudley for Bloomberg. [What to Expect From Retail ETFs in the Coming Months]

The giant discount chain attributes the weakness to customers taking business to rivals as unemployment remains high and higher taxes take a bit out of income.

Specifically, Wal-Mart U.S. same-store sales have declined for the third straight quarter as a 2% rise in Social Security taxes diminished consumer spending. Additionally, consumer confidence took a hit after the 16-day government shutdown. [Retail ETFs Could Get Coal in Their Stockings]

While in-store sales stumble, online sales are growing. ChannelAdvisor CEO Scot Wingo estimates that e-commerce sales will make up 15% of retail sales this holiday season, compared to 13% last year, as sales from online retailers like Amazon (NasdaqGS: AMZN) expands, reports Nat Rudarakanchana for International Business Times.

“In October, Amazon’s same-store sales came in at 23.8 percent growth year-over-year, nearly double comScore’s Q3 e-commerce growth rate of 13 percent,” Wingo said. “Amazon has consistently done well and is really taking share in the world of e-commerce.”

Some broad retail sector ETFs include:

  • SPDR S&P Retail ETF (NYSEArca: XRT): AMZN is 1.2%; WMT is 1.0%
  • Market Vectors Retail ETF (NYSEArca: RTH): AMZN is 9.0%; WMT is 8.3%
  • PowerShares Dynamic Retail Portfolio (NYSEArca: PMR): WMT is 4.7%

Some consumer staples ETFs include:

  • Consumer Staples Select SPDR (NYSEArca: XLP): WMT is 7.9%
  • Vanguard Consumer Staples Index Fund (NYSEArca: VDC): WMT is 7.6%

For more information on the retail sector, visit our retail category.

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