Retail ETFs Lag Despite Surprisingly Strong June Sales Report
- Retail sales rose by 0.6% in June.
- Yet retail-focused ETFs didn’t respond much to the news.
Retail ETFs were little changed on Thursday, even as U.S. retail sales came in much stronger than expected.
The U.S. Census Bureau reported that retail sales rose by 0.6% in June compared to the previous month, far outpacing economists’ expectations for a 0.1% gain. Excluding autos and gas, sales also rose 0.6%, beating the forecasted 0.3% increase.
The upbeat report helped ease concerns about a potential slowdown in consumer spending, suggesting that despite headwinds like tariffs and a slowing labor market, American shoppers are still opening their wallets.
Muted Reaction in RTH, XRT
Still, retail-focused ETFs didn’t respond much to the news. The VanEck Retail ETF (RTH) and the SPDR S&P Retail ETF (XRT) were both flat on the day, trailing the modest gains in the broader S&P 500.
Year to date, both funds have underperformed the broader market. XRT is essentially flat, while RTH is up 5.5%, compared to a 7.5% gain for the S&P 500.
XRT, which manages $254 million in assets, tracks the S&P Retail Select Industry Index, an equal-weighted benchmark. That means each of its holdings, including smaller companies, makes up roughly 1.5% of the portfolio, giving it broad but diffuse exposure across the retail space.
RTH, by contrast, has $244 million in assets and tracks the MVIS US Listed Retail 25 Index, a market-cap-weighted index. As a result, the fund is highly concentrated: Amazon.com Inc. (AMZN) alone makes up 21% of the portfolio, followed by Walmart Inc. (WMT) at 9%, Costco Wholesale Corp. (COST) at 8% and Home Depot Inc. (HD) at 7%.
That heavy tilt toward mega-cap retailers has worked better. Over the past 10 years, RTH has gained 240%, nearly matching the S&P 500’s 252% rise, while its market-cap-weighted structure has allowed it to far outpace XRT’s 84% return over the same period.
