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Tickers in this Article: BKS, BAMM, ARO, PETM, BKE, KSS
It's official: This holiday shopping season is expected to be cruddier for retailers than the last one was. The National Retail Federation (NRF) expects a 1% decline on retail sales this year, and that is not good news for retailers.
However, this a great time for contrarian investors to start shopping for stocks that might be suffering temporarily as a result of the pessimism. Not all retailers will suffer permanent or long-term damage for this year's Scrooge-like spending patterns. Let's take a look at five stocks poised to survive and thrive this year's dreary retail prospects.

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It's All Relative
Just to be fair, it was only a few weeks ago that I was picking on Barnes & Noble (NYSE:BKS) after the bookseller saw a steep dip in earnings following a small dip in revenue. My comparison to competitor Books-a-Million (Nasdaq:BAMM) didn't paint a flattering picture of B&N, and I still contend that the "value" feel of Books-a-Million is more palatable to cost-conscious consumers than Barnes & Noble's higher-end persona (as far as books go anyway).

Nevertheless, I still think the comparables are working in the bookseller's advantage now. The company saw a huge dip in its EPS during the fourth quarter of last year, yet analysts are looking for even worse results during Q4 of this year. (For more on analyst expectations, be sure to read Analyst Forecasts Spell Disaster For Some Stocks.)

Weaker numbers seem unlikely to me this time around, making B&N an upside surprise candidate. This opinion is supported by the fact that Barnes & Noble has topped estimates its last three quarters.

When Will They Learn?
To their credit, the analysts are consistently close when it comes to guessing how Aeropostale (NYSE:ARO) will do on a quarterly basis. To their discredit, I don't know when they'll figure out their guesses are a penny too low, and have been for the last four quarters.

Regardless, considering they're still pretty reliable guesses, it's worth mentioning the market is looking for a per-share profit of $1.20 from Aeropostale during the fourth quarter. If the company turns in $1.21, that would top last Q4's numbers by 20 cents.

Pet Mania Continues
Consider this the obligatory mention of pet-oriented stocks as part of a holiday sales forecast. On a year-over-year basis, Petsmart (Nasdaq:PETM) has exceeded EPS expectations in the past four quarters. The industry was one of the few to actually grow revenue in 2008 - a trend that was expected to continue through this year as well with another 5% increase. You do the math.

Buckle Up
As with Aeropostale, somebody forget to tell Buckle Inc. (NYSE:BKE) we're in a recession. Every quarter in 2008, sales and earnings were better than the same quarter for 2007. So far in 2009, every reported quarter's been better than the same quarter for 2008. Why would Q4 be any different?

Walking a Fine Line
The only true department store making the list is Kohl's (NYSE:KSS). The retailer has so far managed to navigate the constantly moving fine line between value and fashion (admittedly with a value bias). How so? Though only marginally, during Q1 and Q2 of this year, Kohl's improved year-over-year revenue, and stayed within striking distance of improved earnings on a year-over-year basis.

Considering the company's beat estimates by a penny or two during the last two quarters, I can't help but wonder if the big holiday sales quarter (ending in January of 2010) is a set up for a huge surprise. Analysts are already looking for $1.17 per share, which is 7 cents better than Q4 of last year. If Kohl's can exceed expectations, I see fireworks.

Take It With a Grain of Salt
I don't want to imply the NFR's forecast is meaningless, but its track record isn't great. The group was planning on a 2.2% growth rate in holiday sales last year, and we ended up with a 2.8% dip in sales. In 2007, the actual 2.4% increase in holiday sales was well short of the forecasted 4% increase. For 2006, the NRF foresaw a 5% jump in Christmas sales, but we only saw a 4.4% bump. The 5% revenue growth estimated for 2005 was short of the actual 4.4% increase.

The point here is if you think the negative tide predicted by the NRF is too great for any retailer to overcome, the forecast may be anywhere from underestimated to completely backwards. I'll focus on individual retailer results in the meantime. (Read Analyzing Retail Stocks to learn about the most important metrics to look at when analyzing retail stocks.)

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