Thanksgiving is here, which means investors are about to find out which retailers actually understand the American consumer right now. Black Friday marks the beginning of retail's make-or-break season, and this year the story is more complicated than usual. We've got sticky inflation, a widening gap between rich and poor shoppers, and—new this year—AI agents that want to help you pick out gifts. Some of these factors will create winners. Others will expose the losers.

Are People Actually Shopping More?

According to Bank of America's latest Consumer Checkpoint report, total card spending per household climbed 2.4% year-over-year in October. That's the strongest annual growth we've seen since early 2024, and on a monthly basis, spending has now risen for five consecutive months—up 0.3% seasonally adjusted in October.

Holiday-specific spending looks even better, jumping 5.7% from a year ago. But here's the catch: retail transaction volumes, which tell us how many items people are actually putting in their carts, have been falling since January. Translation? Consumers are spending more money, but they're not necessarily buying more stuff. Inflation is doing the heavy lifting here, not increased demand.

Ed Yardeni, president of Yardeni Research, remains optimistic. "Consumers are still spending," he noted, pointing out that despite weaker confidence readings, the fundamentals—employment, wealth effects, and expected tax breaks—continue to support consumer outlays.

The Great Income Divide

October's spending bump came mostly from services: restaurants, airlines, lodging. Those categories accounted for more than half of the monthly gains. Retail purchases, excluding gas and dining, contributed just a quarter of the growth. And even within services, there are clear signs of households trading down—choosing fast food over sit-down restaurants and opting for cheaper travel arrangements.

The widest spending gaps between income brackets showed up in furniture, electronics, and travel. Lower-income shoppers are pulling back on discretionary purchases, while higher-income households continue spending freely.

Bank of America's data paints a stark picture of what economists keep calling the K-shaped economy. In October, higher-income households saw spending rise 2.7% year-over-year, supported by a solid 3.7% gain in after-tax wages. Lower-income households? Just 0.7% spending growth, with wages barely inching up 1%.

Eric Teal, chief investment officer at Comerica Wealth Management, summed it up: "Wealth effects have primarily benefited the top of the income distribution," while the middle class enters the holiday season on much shakier footing.

AI Shopping Assistants Are Here

This could be the first holiday season where artificial intelligence moves from tech curiosity to mainstream shopping companion. Amazon.com Inc. (AMZN) rolled out its AI assistant Rufus, which has already been used by over 250 million customers this year. ChatGPT launched a personal shopper feature. These tools are designed to guide purchases, suggest gifts, and in some cases, complete transactions entirely.

The numbers suggest people are actually using them. OpenAI's ChatGPT saw referrals to retail websites explode 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 just 7% a year ago.

Retailers like Home Depot Inc. (HD) and Etsy Inc. (ETSY) are seeing AI referrals make up about 25% of their referral traffic, though that still represents less than 1% of total site visits. Still, with 17% of U.S. shoppers saying they'll use an AI agent this season, the shift is happening quickly.

How Retail Stocks Have Performed This Year

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

The XLY's performance has been weighed down by its largest holdings, Amazon (AMZN) and Tesla Inc. (TSLA), which have posted relatively modest gains of 4% and 7%, respectively.

The Winners: Five Retail Stocks Crushing It

The top performers in the XRT this year tell a story about where consumer dollars are actually flowing:

• ThredUp Inc. (TDUP) – Up 444% year to date. The online consignment platform is absolutely crushing it as inflation-conscious consumers hunt for deals in the secondhand fashion market.
• National Vision Holdings Inc. (EYE) – Up 173%. The budget-friendly eyewear chain is thriving on steady demand for low-cost essentials that people actually need.
• Carvana Co. (CVNA) – Up 76%. The online car retailer has rallied on improved logistics, leaner inventories, and a gradual recovery in used car demand.
• Kohl's Corp. (KSS) – Up 71%. Shares got a boost from better-than-expected third-quarter earnings and signs that its merchandising strategy is working heading into the holidays.
• Five Below Inc. (FIVE) – Up 57%. The discount variety store is capturing attention from price-sensitive shoppers looking for affordable holiday gifts.

The Losers: Five Retail Stocks Getting Hammered

On the flip side, these five stocks have been the weakest performers in the XRT this year:

• Deckers Outdoor Corp. (DECK) – Down 58%. The company is feeling the pain from weaker demand for high-end apparel and increased competition in athletic footwear.
• Bath & Body Works Inc. (BBWI) – Down 55%. Slower store traffic and shrinking basket sizes reflect consumers cutting back on non-essential indulgences like scented candles and lotions.
• America's Car-Mart Inc. (CRMT) – Down 54%. The subprime auto dealer is struggling with tighter lending standards and cautious low-income buyers delaying major purchases.
• CarMax Inc. (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. (LULU) – Down 53%. Demand for premium activewear is fading as the brand faces stiffer competition from budget-friendly alternatives.

The pattern is pretty clear. Budget retailers and secondhand marketplaces are winning. Premium brands and big-ticket purchases are struggling. The holiday season will test whether this divide deepens or if retailers can find ways to bridge the gap between what consumers want and what they can actually afford.