Retailers have revealed improved holiday sales and better guidance, suggesting that the expanding economy and lower oil prices are making a difference for retail sector exchange traded funds.
The SPDR S&P Retail ETF (NYSEArca: XRT) increased 13.7% over the past three months and rose 11.0% over the past year.
A number of retailers are showing better-than-expected November-through-December holiday sales, with five companies raising their guidance, reports Bob Pisani for CNBC. [Consumer, Retail ETFs Enjoy High Yuletide Spirits]
Specifically, American Eagle (NYSE: AEO), Aeropostale (NYSE: ARO), State Stores (NYSE: SSI), Cato (NYSE: CATO) and Zumiez (NYSE: ZUMZ) raised their guidance.
Moreover, others also reported higher-than-anticipated sales, including Barnes & Noble (NYSE: BKS) and Urban Outfitters (NYSE: URBN).
Most of these smaller-sized companies are held in equal-weight ETF strategies, like XRT, alternative index funds and small-cap consumer. For instance, XRT includes a 1.0% tilt toward AEO, ARO, SSI, CATO, ZUMZ, BKS and URBN.
Additionally, the PowerShares Dynamic Retail Portfolio (NYSEArca: PMR) has a 2.9% position in ZMZ and 2.8% in CATO. The PowerShares S&P SmallCap Consumer Discretionary Portfolio (NYSEArca: PSCD) includes ARO 0.2%, ZUMZ 0.9%, CATO 1.1% and BKS 1.0%.
Analysts believe that the better-than-expected sales are a sign that the lower gasoline prices, improving job market and stronger economy are pushing consumers to spend more, which could continue into 2015.
The healthier jobs market is also driving confidence among American consumers. For instance, the Bloomberg Consumer Comfort Index rose to 43.6 in the week ended January 4, its highest level since October 2007, reports Victoria Stilwell for Bloomberg.
Additionally, confidence looks even better among lower-income groups, which suggests that low gas prices and low mortgage rates are also allowing consumers to buy more goods.
Employment has “been the overriding factor boosting consumer confidence,” Jennifer Lee, senior economist at BMO Capital Markets, said in the Bloomberg article. “You can point to gasoline prices, you can point to low rates in general, but at the end of the day, the job market is the most important.”
SPDR S&P Retail ETF
For more information on the retail sector, visit our retail category.
Max Chen contributed to this article.