Retail Sector ETFs Continue To Outperform Broad Market YTD

Nov. 4.11 | About: SPDR S&P (XRT)

Exchange traded funds tracking the retail sector are coming off a solid month and have been outperforming the broader market by a wide margin in 2011.

Analysts will be watching retail ETFs to help judge the strength of the holiday shopping season and the U.S. economy.

SPDR S&P Retail (NYSEARCA:XRT) is up 10.3% year to date, while the S&P 500 is flat, according to investment researcher Morningstar.

October sales led to the seventh consecutive month for retail gains, at 4%, according to Retail Metrics. The firm’s count of estimates points to a 4.4% increase in October, compared to a 1.5% increase one year earlier, reports Andria Cheng for MarketWatch. [ETF Chart of the Day: Retail]

“October sales have held up well,” Ken Perkins, president of Retail Metrics, said in the report. “An influx of holiday merchandise to stores throughout the month also provided some newness for consumers.” [These ETFs Have Doubled in Price Over the Past Three Years]

Retail HOLDRS (NYSEARCA:RTH) posted a 7.2% gain in October despite worries over the Eurozone debt crisis. SPDR S&P Retail gained 14% in October.

Analysts are calling for a stand-out season for discounters such as Costco (NASDAQ:COST) and Target (NYSE:TGT). Retail Metrics data also points out that high-end retailers such as Saks (NYSE:SKS) and Nordstrom (NYSE:JWN) are likely to outperform even the discount retailers and the mid-level stores.

Black Friday is around the corner for retailers, so they are beginning to plan and announce price matching offers and longer hours to attract more consumers. Additionally, major retailers are hiring temporary workers for the season.

“There are a lot of temporary hires going on as retailers gear up for the holiday season,”John Challenger, chief executive of the research firm Challenger, Gray & Christmas, said. “Consumers might be opening up their wallets a little bit more over the holiday season.”

SPDR S&P Retail ETF

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Click to enlarge

Tisha Guerrero contributed to this article.

Disclosure: None