Retailers are proceeding with caution this holiday season, according to forecasts released Thursday by the industry trade group, the National Retail Federation.
CNBC reports: "Holiday retail sales are expected to rise 2.8 percent to $465.6 billion, the NRF predicts. This growth, while far slower than last year's 5.2 percent gain, is slightly higher than the 10-year average holiday sales gain of 2.6 percent, the group said."
Retailers are feeling more optimistic about this year's holiday sales thanks to strong promotions and lean inventory levels. These cautionary measures insure they are in a better position to handle consumer uncertainty than in prior years when stores were left with excess inventory.
The usual suspects are at play in consumer uncertainty: high unemployment, rising costs, modest income growth, volatile markets, and unclear forecasts in market growth.
Retailers hope a few factors would boost holiday season spending, including an increase in sales over 14 consecutive months and a gradual decrease in household debt. "But with consumer confidence remaining at depressed levels, it is unclear how sustainable this is." Furthermore, it may take more time before America's cash-strapped consumers are quick to spend, even on the holidays.
The unemployment rate may also dip during the holiday season as "The NRF predicts the industry will hire between 480,000 and 500,000 seasonal workers this year. The NRF said this is comparable to the 495,000 seasonal employees that were hired last year." It will be interesting to see whether seasonal income will be spent or saved.
Retailers are playing a "wait and see" game for the holiday season; maybe we'll end up seeing stronger than expected holiday retail sales.
But which companies are expected to see the biggest reversals?
To help you explore some ideas, here's a list of consumer stocks that might be worth a closer look (at least in the short term, if you like to track short-seller trends).
To create this list, we started with a universe of retailers that have been dragged down by the market's recent weakness.
To refine the quality of the list, we collected data on short trends, and identified the retail stocks that have seen a significant decrease in shares shorted over the last month (i.e., short-sellers have reduced bets that these stocks will decline)
Short-sellers appear to think the upside potential of these consumer stocks outweighs the downside potential -- do you agree? (Click here to access free, interactive tools to analyze these ideas.)
3. Collective Brands
4. Pacific Sunwear of California
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Eben Esterhuizen does not own any of the shares mentioned above. Short data sourced from Yahoo! Finance.
The Motley Fool owns shares of SUPERVALU and Aeropostale. Motley Fool newsletter services have recommended buying calls in SUPERVALU. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.