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Prepare for the worst holiday season since 2008, Morgan Stanley says

Prepare for the worst holiday season since 2008, Morgan Stanley says
Shoppers browse the stores at the Westfield Santa Anita Mall on Oct. 29, 2013. (Glenn Koenig / Los Angeles Times)

Researchers at Morgan Stanley have a pretty simple forecast for the coming holiday season: Expect coal.

A new report from the financial services firm anticipates the period between Thanksgiving and Christmas this year to be the slowest and most promotion-heavy since 2008, which was the first holiday season affected by the recession.

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Same-store sales at retailers, including specialty and department stores, will rise 1.7%, according to the report. Strip out struggling J.C. Penney, which is expected to start offering deep discounts early in the season, and projected sales growth for the fourth quarter slips to 1.6%.

Last year, sales surged 3.5%, Morgan Stanley said.

Blame a raft of worrisome economic conditions, researchers said. Consumer confidence is low. The recent government stalemate and shutdown didn't help. The holiday shopping window is six days shorter than it was last year.

And even though gains in wealth and lower gas prices seem to be boosting Americans' buying power, many are parlaying it into larger items such as cars, appliance and home improvement goods.

Retailers might "push the promotional 'panic button' earlier than needed," trying to lure shoppers with bargains at the expense of profit, according to the report.

"While the ability to spend more is apparent, willingness remains the key question," researchers wrote.

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