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As Main Street gears up for the holiday shopping season, the retail sector takes center stage on Wall Street.
The bad news for those investing in retail stocks: Morgan Stanley cautions overall retail sales growth is expected to be the weakest since 2008 – meaning the sector's robust 40% year to date could be headed for a slowdown.
Weighed down by concerns over pay and hiring, consumer confidence continues to fall, suggesting consumers will continue to be tight-fisted. After a steep drop in October, the consumer confidence level fell further in November. Slipping to 70.4 from 72.4, it marks the lowest level in seven months, Tuesday's Conference Board data revealed.
A big challenge is the lateness of Thanksgiving this year, which cuts the holiday shopping season short by a week. The last time Thanksgiving fell so late on the calendar was 2002.
The National Retail Federation says shoppers will shell out slightly less this year. According to the retail group's annual survey, the average shopper will spend $738 on holiday gifts, down about 2% from the average $752 spent over the 2012 holidays.
With the holiday season accounting for as much as 40% of the industry's annual sales, retailers took action with Gray Thursday.
Many of the nation's biggest retailers including Toys R Us, Best Buy Co. Inc. (NYSE: BBY), J.C. Penney Co. Inc. (NYSE: JCP), Macy's Inc. (NYSE: M), and Target Corp. (NYSE: TGT) will open on Thanksgiving evening. They'll featuring overnight sale marathons that run through Friday.
Some analysts say this is an act of desperation, that retail is struggling so much it's willing to cut into family time to make a sale.
That's why retail stocks' year-to-date gains – which have beat the S&P 500's 26.54% – will hit some headwinds in the year end.
According to Bespoke Investment Group, retail stocks typically underperform during the final months of the year. Generally, the sector sees its yearly high shortly after Thanksgiving, while the S&P 500 experiences its peak at year's end.
But there's one retail stock to be bullish about, and that's due to its #1 position in a still-growing sector…