XRT Is Up 11% But the Real Story Is Which Retailers Are Winning

The SPDR S&P Retail ETF (NYSEARCA:XRT) tracks the S&P Retail Select Industry Index with equal-weighted exposure across 73 retail holdings spanning apparel, grocery, discount, and specialty retail. Unlike market-cap weighted funds, XRT’s equal-weight structure means smaller retailers carry the same influence as mega-caps like Walmart. XRT has delivered 11.05% returns over the past year, but recent momentum has stalled — the fund is up just 2.47% year-to-date and has pulled back 3.34% over the past month, reflecting growing uncertainty about the consumer spending outlook.

Value-oriented retailers are driving XRT’s strongest performance. Walmart Inc. (NYSE:WMT | WMT Price Prediction) posted eCommerce sales surging 27% year-over-year, helping the company beat revenue estimates by $4.33 billion and pushing its stock up 15.65% year-to-date. TJX Companies (NYSE:TJX) similarly benefited from the consumer trade-down trend, with comparable sales rising 5% and total revenue growing 7.49% — evidence that off-price retail continues to capture wallet share from full-price competitors.

The contrast with full-price retail is stark. Dollar General (NYSE:DG)’s 37.6% EPS beat and 2.5% same-store sales growth reflect the same value-seeking consumer behavior driving the broader discount retail rally. Target (NYSE:TGT) tells the opposite story — operating income fell 18.91% as the company struggled to compete without a clear value proposition, illustrating how bifurcated the retail landscape has become.

The Most Important Macro Factor: Consumer Spending Momentum

XRT’s performance hinges on U.S. consumer spending strength. Watch the U.S. Census Bureau’s Monthly Retail Trade Report, released two to three weeks after each month ends. The December 2025 reading showed retail sales at $735 billion, flat month-over-month but up 3.3% year-over-year. If monthly growth drops below 2% or turns negative for consecutive months, XRT will face downward pressure as weaker demand compresses margins across holdings. The University of Michigan Consumer Sentiment Index sits at 52.9 as of December 2025, in recessionary territory below 60. A sustained reading below 50 would signal deteriorating confidence one to three months ahead of spending declines.

The Most Important Micro Factor: Equal-Weight Rebalancing

XRT’s equal-weight methodology creates quarterly reconstitution events that can shift performance dramatically. Unlike cap-weighted funds where Walmart’s dominance would amplify its 15.65% year-to-date gain, XRT gives equal influence to all 73 holdings. Monitor State Street’s monthly holdings files and quarterly rebalance announcements for subsector weight changes. If the next rebalance increases exposure to struggling full-price retailers while reducing value-focused names, the fund could underperform even if mega-cap retailers continue rallying.

Watch for sentiment deterioration below 50 as an early warning of spending weakness, and monitor quarterly rebalance announcements for subsector shifts that could alter XRT’s exposure to discount versus full-price retail.