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Morgan Stanley Predicts Happy Holidays for L Brands, Lululemon and Ross


The holiday shopping season is shaping up to be a puzzling one as consumer spending reports continue to contradict each other.

The latest, from a group of Morgan Stanley analysts led by Kimberly Greenberger, predicts 1.2 percent growth in sales in 2015, down from 2.8 percent last year. By comparison, The NPD Group polled 3,620 people and found that 15 percent said they intend to spend more on gift this year.

In a note titled “The Grinch Could Steal Christmas,” the investment bank analysts declared that unusually warm weather coupled with consumers’ changing priorities (meaning, they’re less likely to spend on apparel) will impact the once-bustling shopping season in a bad way.

“We expect record levels of liquidity funded by income versus debt, along with further strengthening driven by additional energy savings, home price appreciation as well as the improved buying power of the dollar to continue to support consumer fundamentals,” the analysts said, quoted by Bloomberg. “However, consistent with the strong though slowing pace of job gains as well as a rise in stock market volatility, we expect lower rates of spending growth in the fourth quarter.”

It’s not all doom and gloom, however. According to the analysts’ research, some companies will have a very merry Christmas.

L Brands, parent company of Victoria’s Secret and Bath & Body Works, should sustain strong momentum to stay consistent with previous years, when it brought in half or more of its annual income during the holiday season.

High-end activewear label Lululemon, which has experienced more than a few hiccups of late, is forecast to see a jump in comp-store sales of between 5 and 12 percent. “Several factors support our conviction in LULU, namely incremental design initiatives, including the pant wall [in September] and tank wall relaunch, helping add newness and expanding the product assortment,” Morgan Stanley’s note said.

Ross Stores, currently on track to open 2,500 new Dress for Less and DD’s Discounts locations, has delivered “solid earnings results” over the past five holiday seasons “leading to an average share price increase of circa 1.2 percent” and is expected to do well this year, too.

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Beaverton, Oregon-based apparel and footwear behemoth Nike, which recently announced an ambitious plan to grow sales to $50 billion by the end of fiscal 2020, should also experience a strong holiday season.

“Strong futures growth acceleration (17 percent from 13 percent), particularly in North America (15 percent from 13 percent), underscores the brand’s momentum in wholesale,” the analysts said.