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5 Retail Stocks Jolly With Holiday Cheer

NEW YORK ( TheStreet) -- This holiday season consumers are looking for electronics, value-added deals and anything they can purchase online or through their mobile devices.

According to the National Retail Federation, holiday retail sales will rise 3.9% over 2012 to $602.1 billion, fueled by consumers' demand for larger ticket items as well as the growing online shopping experience. However, fiscal concerns as well as any lasting effects of the government shutdown could temper holiday spending, the trade association said.

A few weeks ago Morgan Stanley analysts predicted that the 2013 holiday season would be the worst season for retailers since 2008, the height of the recession.

"Debt dynamics, gains in wealth, and lower gas prices have lifted consumer buying power ahead of the 2013 holiday shopping season, but Congressional discord and balance sheet priorities cloud the outlook. While the ability to spend more is apparent, willingness remains the key question," Morgan Stanley analysts wrote in a retail industry research note on Oct. 31.

As retailers struggle to get shoppers in the door, the Morgan Stanley note predicted that margins would erode this season given the high promotional environment by retailers.

"We expect specialty retail fourth quarter gross margins to decline 66 bps year over year , on average," the note said. "We predict J.C. Penney will offer extremely deep discounts early in the season to ensure it achieves its positive comp guidance, putting pressure on other retailers to do the same. Also, with six fewer shopping days between Thanksgiving and Christmas, retailers could push the promotional 'panic button' earlier than needed, putting margins at risk."

Last week's BDO USA survey forecast that the consumer electronics category will likely be the top-performing category once again this holiday season as well as the most discounted. The survey findings are from the most recent BDO Retail Compass Survey of CMOs, which polled 100 chief marketing officers at leading U.S. retailers in September and October.

Another bright spot are gift cards, which continue to be "a very popular option for busy shoppers and discerning family and friends on holiday shopping lists," the survey found. Gift card sales are expected to rise 6.9%, according to BDO.

The stocks on this list have some very common themes: With the new gaming consoles hitting the shelves later this week, more than a few companies are expected to benefit from added sales. Online commerce continues to perform above and beyond as well as the trend for strong bargain hunting by wallet-conscious consumers.

TheStreet presents its top retail stocks this holiday season.

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