10 Retail Stocks To Watch As The Holiday Season Begins - State Street SPDR S&P Retail ETF (ARCA:XRT)

With Thanksgiving just hours away, investors are bracing for the most pivotal stretch of the retail calendar, as Black Friday launches a high-stakes holiday season shaped by shifting consumer behavior, sticky inflation and growing divides in household spending — factors likely to separate retail stock winners from losers.

Is Holiday Shopping Off To A Strong Start?

Bank of America's latest Consumer Checkpoint report shows total card spending per household rose 2.4% year-over-year in October, marking the strongest annual growth since early 2024.

On a monthly basis, spending increased for the fifth straight month, up 0.3% seasonally adjusted.

Holiday-specific spending per household jumped 5.7% from a year ago. But retail transaction volumes — a proxy for how many items people are actually buying — have been declining since January.

Simply put, consumers are shelling out more cash, but that may be driven more by inflation than by rising demand.

"Consumers are still spending," said Ed Yardeni, president of Yardeni Research. He added that despite weaker confidence, fundamentals — employment, wealth and expected tax breaks — support continued spending.

The Income Divide: Who's Powering The Holidays?

October's spending growth was powered primarily by services, including restaurants, airlines and lodging, which made up over half of total monthly gains.

Meanwhile, retail purchases excluding gas and dining contributed just a quarter of the growth.

But even in services, some households are clearly trading down — opting for fast food over full-service restaurants and choosing lower-cost travel options.

Furniture, electronics and travel showed the widest spending gaps between income brackets.

Lower-income shoppers pulled back while higher-income households continued to spend freely on discretionary goods.

Bank of America's data reveals a sharp split in spending patterns across income groups, underscoring the persistence of a K-shaped economy.

In October, higher-income households saw spending rise 2.7% year over year, supported by a 3.7% gain in after-tax wages, while lower-income households managed just 0.7% spending growth, with wages inching up only 1%.

“Wealth effects have primarily benefited the top of the income distribution”, while the middle class is entering the holiday season on shakier ground, said Eric Teal, chief investment officer at Comerica Wealth Management.

AI Agents: Retail's Next Big Sales Assistant?

This may be the first holiday season where artificial intelligence becomes a mainstream shopping tool. From Amazon's AI assistant Rufus, used by over 250 million customers this year, to ChatGPT's new personal shopper, AI is being deployed to guide purchases, suggest gifts and even complete transactions.

OpenAI's ChatGPT saw referrals to retail websites skyrocket from 1.7 million to 14.4 million between October 2024 and October 2025.

It now accounts for 16% of total referrals among AI-driven traffic sources, up from 7% a year ago.

Retailers like Home Depot Inc. (NYSE:HD) and Etsy Inc. (NYSE:ETSY) are seeing AI referrals comprise 25% of their referral traffic, even though that remains under 1% of total visits. Still, with 17% of U.S. shoppers saying they’ll use an AI agent this season, the trend is moving fast.

Retail Sector Performance: 2025’s Winners and Losers

The State Street SPDR S&P Retail ETF (NYSE:XRT) has climbed 6% year to date through Nov. 26, slightly outperforming the broader Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY).

The XLY's performance has been dragged down by its heavyweights, Amazon.com Inc. (NASDAQ:AMZN) and Tesla Inc. (NASDAQ:TSLA), which have posted muted gains of just 4% and 7%, respectively.

10 Retail Stocks to Watch This Holiday Season

The five best-performing stocks within the XRT so far this year are:

ThredUp Inc. (NASDAQ:TDUP) – The online consignment platform has skyrocketed 444% year to date, as inflation-weary consumers flock to secondhand fashion in search of deeper discounts.
National Vision Holdings Inc. (NASDAQ:EYE) – Up 173%, the budget-friendly eyewear chain is thriving on steady demand for low-cost, essential goods.
Carvana Co. (NYSE:CVNA) – The online car retailer has surged 76%, helped by improving logistics, leaner inventories and a gradual recovery in used car demand.
Kohl's Corp. (NYSE:KSS) – Shares have gained 71%, boosted by stronger-than-expected third-quarter earnings and signs of a successful merchandising pivot ahead of the holiday rush.
Five Below Inc. (NASDAQ:FIVE) – Up 57%, the discount variety chain is capturing the attention of price-sensitive shoppers looking for low-cost holiday gifts.

On the other end of the spectrum, these five stocks have been the weakest performers in the XRT this year:

Deckers Outdoor Corp. (NYSE:DECK) – Down 58% as the company felt the sting of weaker high-end apparel demand and stiffer competition in athletic footwear.
Bath & Body Works Inc. (NYSE:BBWI) – Shares have fallen 55%, hit by slower store traffic and shrinking basket sizes as consumers cut back on non-essential indulgences.
America's Car-Mart Inc. (NASDAQ:CRMT) – Off 54%, the subprime auto dealer is grappling with tighter lending standards and cautious low-income buyers delaying big-ticket purchases.
CarMax Inc. (NYSE:KMX) – Also down 54%, the used vehicle giant continues to face headwinds from elevated interest rates and a cooling secondhand car market.
Lululemon Athletica Inc. (NASDAQ:LULU) – Shares have dropped 53%, with high-end activewear demand fading and the brand facing increasing competition from budget-friendly alternatives.