The Grinch Could Steal Christmas For Investors, Experts Warn

• Kimberly Greenberger of Morgan Stanley commented in a note that the upcoming holiday sales growth will fall below last year's growth.
• Greenberger is estimating a 1.2 percent Softline holiday comps this year versus 2.8 percent last year.
• Greenberger is also forecasting a 3.0 percent Hardline/Broadline holiday comps versus 3.8 percent last year.

Despite consumers' improved financial health and lower gas prices at the pump, Kimberly Greenberger of Morgan Stanley commented in a note that holiday sales growth is expected to fall short of last year. Overall fourth quarter annualized growth in real consumer spending is expected to be 2.4 percent versus 4.3 percent last year.

Greenberger is expecting an industry-wide 1.2 percent Softline holiday comps this year versus 2.8 percent last year. She noted three key concerns to support a "cautious" view: 1) a "lackluster" apparel spending environment, 2) the fourth quarter is the "most difficult" sales and gross margin comparison period of the year, and 3) an "unfavorable" weather outlook – expected to be the warmest winter in four years.

Related Link: NRF Predicts 3.7% Increase In Holiday Sales This Year, Significantly Higher Than 10-Year Average

Greenberger is also forecasting a 3.0 percent Hardline/Broadline holiday comps this year versus 3.8 percent last year. The analyst noted this is based on a correlation with her discretionary spending model which is similarly predicting a year-over-year moderation in spending (4.0 percent versus 4.7 percent last year) over the holidays.

Retailers that are "best positioned" include L Brands Inc LB, Lululemon Athletica inc. LULU, and Ross Stores, Inc. ROST while Kohl's Corporation KSS has "the greatest downside risk."

Greenberger said that while a 3 percent comp appears "healthy on the surface," it is being held back by spending on big ticket durable goods and communication services. The analyst also pointed out that despite a pullback in electronic sales, she is expecting a "re-acceleration" in the fourth quarter which could result in earnings upside. Accordingly, Best Buy Co Inc BBY was named as a "well-positioned holiday name."

'Continued Strong Athletic Trends'

Greenberger is expecting athletic trends to remain strong and the holiday period should "reconfirm" the ongoing strength in the health and wellness category. As such, Nike Inc NKE, Skechers USA Inc SKX, Foot Locker, Inc. FL should "see some benefits."

On the other hand, DSW Inc. DSW, Steven Madden, Ltd. SHOO, and Genesco Inc. GCO are "among the most sensitive names in Branded Apparel & Footwear" for the holiday season.